Japan Update 2018: Economy

October 10, 2019 0 By Kody Olson


OK, I would like to start
the afternoon session. So can we start? The session right after
lunch is a bit tough one, but we would like to make the
exciting economic session. So let’s start the
economic session. I’m Ippei Fujiwara,
Professor of Macroeconomics here at ANU and Keio University. And we are really
fortunate to have Dr. Uri Okina the chairperson of
the Japan Research Institute as a speaker of the economic
session at the Japan [INAUDIBLE] 2018. Uri is one of the most
respected economists in Japan and has a deep knowledge of
the various economic issues such as financial
system, taxation, monetary and fiscal
policy, social security, medical things,
and even fintechs, namely every important
field in macroeconomics. And as a result, Uri
has been a member of the various
government committees such as the financial
services agency council on financial
services under government tax research specialist commission. So she has been doing
so many important jobs. And so therefore we
have the perfect person for the speaker in
the economic session to discuss the economic
challenges in Japan from various perspectives. We are also fortunate
to have Mr. Jason McDonald the chief advisor
on the G20 Sous-Sherpa? Am I pronouncing correctly? It’s “Soo-share-pa.” It’s Sous-Sherpa. OK, sorry. It’s a difficult word. Thank you so much. Anyway, it’s really
important job, OK? So in the domestic
policy group of that the Department of the Prime
Minister and the Cabinet are discussed in this session. So Jason is one of the
most influential policy economists in Australia. I had several chances with Jason
to discuss the economic issue and he’s always smart. And I tend to talk lot and get
lost, don’t understand even what I’m talking about. Jason can interpret what I
say in the nicest and the most elevated manner. So as a result,
all I need to say is always, yeah,
that’s what I mean. So he’s a really nice person. So and so therefore
to conclude, we have the perfect speaker as
well as a perfect discussant in this economic session. So without further ado, please
join me in welcoming Okinasan. [APPLAUSE] Fujiwarasan, thank you very
much for the introduction. My name is Uri Okina. I am an economist of the
Japan Research Institute. So today I would like
to make a presentation about Japan’s economy and
policy issues going forward. So I would like to
give you a brief sketch about the Japanese economy now. And then I would
like to explain how we are evaluating that
economics after five years. So this is the prospects
of Japan’s economy. So Japan’s economy is
recovering moderately and the annual rate of GDP has
been around one percentage. And this recovery will
continue until next year. Is set to continue until
next, year the year before the Tokyo Olympic
games held in 2000. But there have been
various this mainly from abroad such as the
protectionist policy of the US and emerging market
contingency risk and so on. Economic recovery is supported
by the relatively domestic demand and external demand. And the economic
coincident index has been rising,
reflecting a pickup in production and shipments. These are growth
trends of the exports. And the growth trend in exports
of capital goods and so on just continues. And our exports to China or
the US or Europe and so on has been increasing. So industrial
production in Japan saw moderate
increases these days. But the US protectionist
trade policies are now severe concern
for Japan’s economy. Concerns have spread
to Japanese companies with factories in China due to
the trade war between the US and China and Japanese
automobile companies, who, with factories
in Mexico or Canada, due to revision of the
agreement of NAFTA. So we’re especially worried
about weather the automobile tariff for Japanese cars
are realized or not. As the automobile industry
covers a broad range of fields, there is a risk that if
the tariff is realized, it will result in
downward pressure on production in Japan. So, this is capital
investment and thanks to the relatively
good environment, corporate earnings
have remained strong. So as you can see,
the [INAUDIBLE] and abundant cash flow,
capital investment has remained on a
moderate upward trend. Private investment is focused
mainly in the use of labor saving against a backdrop of a
labor shortage and the capacity building corresponding to
the digital innovation. So as you can see that
leading indicators for business fixed
investment is increasing now. And this is the
unemployment rate in Japan. As you can see, the
unemployment rate stayed at a very, very, very
low level, about 2% point or so. And since the beginning
of 2018, the pace of increase in the
number of workers, mainly non-degree
workers, has accelerated. So Japan is said
to be a recording in a state of near full
employment, I think. This is a slide of the
household consumption. Although wages for non-degree
workers are increasing, wages for regular
employees are sluggish. Increase of the wages of the
regular employees are sluggish. But, thanks to the
improvement in employment, you know that I mentioned the
unemployment rate is very low, household consumption
expenditure will remain on a
moderate recovery path. But the inflation
subdued at below 1.0%. So although Bank of
Japan has resorted to monetary easing aggressively
for five years, for maybe five years, on consumer
prices this black line, increase has been very
low, below 1.0% level. So it’s about 0.7% or so. So, it is one of the
big issues in Japan. So let’s move on to the
evaluation of Abenomics. So five years,
almost six years have passed since the Abe
Administration came to power at the end of 2012. Let us first compare the
major economic indicators for the fourth quarter
of 2012 and the most recent figures for 2018. Overall, the economy is
displaying a steady growth. GDP is increasing. And GDP gap, it’s
supply and demand gap, has been largely eliminated. And the unemployment rate,
it’s from 4.3% to 2.2%. So significantly the
unemployment rate has reduced. But at the same time,
inflation is really low. minus 0.1% to 0.7%. And you know, that potential
gross rate has barely risen. And [INAUDIBLE] of outstanding
debt to GDP has increased. It’s a very huge amount I think. So this is a brief sketch of
the comparison of the start of Abeconomics and now. And maybe you know that the
three arrows of Abenomics. But the three
arrows pf Abenomics were the policy package
of the Abe Administration. They were the old three arrows. This is 2013. When the Abe
Administration started, he said that the three
arrows are very important. They were bold monetary policy,
it is a 2% inflation target. And quantitative and qualitative
easing, QQE is very important. And the two is a
flexible fiscal policy. It’s large scale
public spending. And third is a growth strategy
that stimulates private sector investment. Measures including
regulatory reform, reform of corporate
governance, and deduction of corporate taxes, and so on. In 2015, Abe was
elected as the leader of the Liberal Democratic
Party’s presidential election. And positioned the
next three years as the second
stage of Abenomics. Abe announced a new three
arrows for Abenomics, taking up the slogan, a society
in which all 100 million people can be active. The new three arrows
are a strong economy that produces hope
and support for child raising that fosters dreams. And three, social security
that provides citizens with a sense of reassurance. In concrete terms,
the policy continues to prioritize a growth
strategy, but also seeks to hold the
decline of the birth rate and create a society
that promotes women’s involvement
in the work force, looking towards a situation in
which no woman needs to leave the work force in order
to provide nursing care to a member of her family. So how do we evaluate Abenomics? I think it is very important. I’d like to point
out the three points. The former, the old
three arrows were skewed towards monetary policy. And the growth strategy
is producing outcomes but speed is lacking. And the third one is it’s
a very important point that the social security
reform is essential. So I’d like to explain
about each point. So, this the balance sheet
of the Bank of Japan. So the former three
[INAUDIBLE] of economics commenced with the Bank of
Japan’s monetary policy. Haruhiko Kuroda announced
that policy on his appointment as Governor of the Bank
of Japan in April, 2013, attempting the realization of
a 2% inflation target in two years by the radical
quantitative, qualitative easing QQE, including the annual
purchase of Japanese government bonds totaling 50
trillion yen per year. As you can see from the
chart, the [INAUDIBLE] with the Bank of
Japan’s balance sheet is increasing
rapidly since 2013. Initially, the new
monetary policy had not only decreased
interest rates, but also produced a weaker yen. These results promoted the
purchase of the Japanese stocks by overseas– mainly by the overseas investors
and boosting stock prices. We may say these
positive effects improved the profitability of
Japanese companies I think. But these are the trends of
the long term interest rates. So still, Bank of Japan failed
to boost the inflation rate. Bank of Japan had no choice but
for a further monetary easing with the introduction of a
negative short term rate. And [INAUDIBLE] don’t
have control policy that picked a long
term interstate to cross to zero
please look to this is a cop control the long
term age is almost as still a percentage. However, as I said,
even after five years the inflation rate
has not reached 1% and the value of
negative side effects have been generated the low
for wrong interest rates have dampened the profitability
our banks, especially for the regional banks
in Japan and bad quarter past pick of long term late
interstate Allendale LET to a lack of market
warnings as debt growth. This is the ratio of the
Bank of Japan’s asset to GDP maybe you can
see where you offered compared with that if
[INAUDIBLE] and the European Central Bank. The Bank of Japan’s asset to
GDP ratio is very, very large. So considering Japan’s
worsening fiscal situation and exit from quantitative. Quantitative easing is
increasingly difficult prospect Let’s move on to
the growth strategy. The major direction set forth
in the growth strategy proposed by the new three arrows of
Abenomics [INAUDIBLE] reform, flexible working status,
fostering human resources like university
reforms and so on, and reform of
corporate governance, introduction of corporate
governance code, and support for the innovation
in the digital arena, essential initiatives. I think these are the essential
initiatives for Japan. And Japan’s growth
strategy now is just trying to realize
the society 5.0. This means a [INAUDIBLE]
smart society using the Internet
of Things or big data or AI and new technology. The world of society 5.0
was originated in Japan. It was originated in Council for
Science and Technology Policy in Japan in 2016. And the government says that
in the society 5.0 system, people’s lives will become more
comfortable and sustainable by taking on
technological innovation. As you know that in
Germany, industry 4,0 is just mainly focused to
the manufacturing industries. But society 1.0 is just focused
to the you know people’s lives. So it is important to the
technology innovation improves our lives life
[INAUDIBLE] of the people, especially for the older people. Maybe you think that, what is
how society 1.0 and 1.2, 2.0, or 3.0, this is a
hunter gatherer society, you know the society
of agriculture and industrial society. And now we are the information
society, society 4.0. And we are going to
rewrite a society 5.0. And as you get see from
the red bar in the chart, the productive age population
has been shrinking since 2000. And considering the decline of
the productive age population, the most important
policy issue for Japan is productivity, to increase
the productivity, I think. So rapid implementation
of supply side reforms are urgently needed. So as I indicated
before by my slide, the potential
growth rate figures, initiatives made by
Abenomics have not yet led to an increase of
the productivity so far. So these are the growth
strategy of 2017 and 2018. So our policy decision to
focus on five strategy fields, like health, and longevity
of the people of the people, and transportation revolution
and fintech and so on. So the policy of promoting
digital innovation in the field of such
areas has being set out. But I think an increase in
the highest speed of reform is essential against the
background of intensifying international competition. So with the outstanding
debt to GDP ratio standing at an extremely high level,
compared with other countries, this is Japan and the US
and four European countries are like this. So this is a very,
very high level. So but, I think that
for the advances in fiscal restructuring
will be inevitable, even with an increase in
consumption tax scheduled for next year. And this figure shows the
expenditure and tax revenue to about for about 45 years. It is often said in
Japan, the shape of this is like the shape of the
mouth of a crocodile. And total expenditure
of the government remains very high because of
the increasing social security spending, like Medicare or
aged people care and so on. And the tax revenue
is a blue line. And as you can see
the very low level is continuing and now just
a little bit increasing. And this increase is due to the
increase of corporate income tax after the Abenomics and
also the consumption tax hike in 2015. But as I said that
the social security expenditure is very high. And considering the
demographic change, maybe [INAUDIBLE] will
present next session, but let me see the trend
in population composition by age group. But it is said that
from 2025, Japan we become a super-aged society. Let me look to the line,
and this is the ratio of 75 and above the population. So from 2025, this ledger
is increasing dramatically. So, we think that
we have to prepare for the super-aged society
as soon as possible I think. And this is the change
in the composition of fiscal expenditure
from 1960 to 2018. And so I think that of
particular importance is control increase
in social security. This is composition is
very large now days. And social security
today expenditures are 33 trillion yen and
accounting for about, if we meet the national
debt service and so on, accounting for 55% of the
general expenditure in 2018 budget. So increasing healthy
life expectancy and boosting the efficiency
of the medical boosting the efficiencies of the
medical care provision through better coordination
of medical data priorities I think. In addition, it will be
essential to control Medicare in elderly nursing care
related public expenditure in diverse areas while
maintaining health insurance for all students. So it is very difficult
task for Japan, I think. So as you can see
from this left chart the supply of the caregivers
for the older people will run short. It’s a set of super-aged,
super old aged era, 37,000 people are
projected to be working. And results of the surveys
concerning social security shows that about
the 93% respondents feel anxiety strongly or to
some extent, to fear anxiety is represented. 93% regarding the
future sustainability of the social security system. So I think eliminating the
anxiety about the future that Japanese citizens
are experiencing will surely benefit the
growth of the Japanese economy and its society. Thank you very much indeed. [APPLAUSE] Thank you very much, Okinasan. Now it seems like
a very difficult to find a peak in the future
in the Japanese economy. So, we would like
to have the comments and the questions from Jason,
so that, could you start? Yes thanks very much
for inviting me here. It’s a real privilege
to be at this event with such distinguished
economists around me. I want to say thank you
very much to Jiro as well. One of the reasons why
it’s such a privilege is Japanese economy is so
unique and so interesting that I think if
you love economics, at some point you’ll spend
a bit of time thinking about the Japanese economy. I studied it at
university in the ’90s. It’s history. And it’s been with me as
an interest ever since. And you do get a lot of the
world’s great economists looking at it. Bernanke obviously,
had a bit of interest and Krugman and others. Uri’s presentation was so
comprehensive and so good. When I asked sort my
team to have a look and give me some comments
that I could make, they came back and said, they
didn’t have any criticism. So what you’re about to hear
are my scattered thoughts. One of the really interesting
things in the presentation was the size of Japan’s debt. And this has been a
big debate in economics for many years, exactly how
much debt can one country have? What is the limits of
fiscal sustainability and what creates those limits? It’s particularly interesting
at the current time when you see countries with
much lower levels of debt, much lower deficits and much
younger populations suffering more because of their
fiscal situation than Japan appears to be. And it seems to have
something to do with the fact that Japan’s debt any
country’s financial stability, fiscal sustainability, is linked
to whether their debt is issued in their own currency
or a foreign currency. If it’s issued in
your own currency, then it’s much more stable
and sustainable through time. Also, if you’ve got
a high savings rate. And the third one is a very
sound financial sector. So those three things are
clearly in Japan’s favor when going to markets
to ask people to finance their government deficit. Some other things that are
interesting about the Japanese economy is that when we
think about it’s growth rate, we really have to think about
the size of the inputs that are going into it. So while we might think a
1% growth rate is quite low, it’s not low given the size
of the Japanese working age population, the declining
working age population. So in the sense of
what its potential is, Japan’s economy and its
economic performance has been quite
remarkable recently. JGA are obviously risks
around their exports with such a country so tuned
into the global trading system as Japan, in that exports
have been providing a boost, and not for obvious reasons
that is a risk going forward. Another risk that’s
kind of more structural is potentially the fact
that moder supply chains or international trade
is 2/3 investment goods traded across borders. So the goods that are
traveling across borders are those goods which are
used in other business production in other countries. And where the
global economy seems to be going with
new technology is a reduction in the size
of the capital needed to produce things. So a question I guess
I’ve got in my mind and have had for a while,
is the new technology can we prove the
efficiency of capital so much that a lot of
these transporter goods might be needed? You can actually see
that in the trade data at the moment with
services becoming a larger share of global trade. And one other, a few more,
another interesting part of her presentation is
the Japanese labor market, the rapid rise of women in
the workforce in particular. This seems to be
associated with a shift to an informal labor market
and rising informality and the bifurcation
in the Japanese labor market between the old,
formal jobs for life and then the new economy. And a question, I
guess another one, is new technology
somehow behind that? We’re seeing a rise of new
technology disintermediating firms, making it easier for
more marginalized workers to get into the labor
market, making it easier for women to match
what they sometimes consider to be their
responsibilities in the home with employment as well. So new technology may be part
of this structural adjustment. And the policy issue I guess
is how should we respond? Should we be, not we, but should
Japan be facilitating that, maybe applying some of the
same kind of flexibility to the formal labor
market or trying to provide some
additional protections in the informal part? Now the really
big issue that has fascinated people for the last
few years, monetary policy. And the real question,
why is inflation so low despite what is in world
terms almost unprecedented loosening through the QQE? One reason potentially is that
monetary policy has avoided the expansion and the
purchases by the Bank of Japan, has avoided debt denominated
in foreign currencies. So they’ve been trying to avoid
any direct impact on the yen, possibly to avoid perceptions
that they may be trying to manipulate the currency. But normally, that mechanism,
that transmission mechanism through extraordinary
management policies is one of the key
ones which is used to drive growth and inflation
pressures in the country. We think about the
purchase of the bonds is operating on
the risk premium. It is changing
inflation expectations. And then the third
sort of mechanism from those kind of interventions
is on the exchange rate. Another other
reason why inflation might be too low according
to the government’s policy is that even though
the output gap is gone, by the numbers, that’s
an assessment of where we think the capacity of
the Japanese economy is. New technology may
be changing things in ways which are
different going forward. So supply that’s a potential
in the Japanese economy may be larger than we
thought in the past. Normally economists
tend to think that the supply capacity
in the economy, you see it when you see it. That’s when inflation
starts to take off. So in one sense, we
haven’t reached the output, and this is a general view
around many advanced countries, we haven’t reached
the point at which output gap has disappeared
because inflation hasn’t taken off. Another one is that
inflation expectations seem to be incredibly well anchored. And that has meant that
it has been difficult, despite quite significant
interventions, to get inflation up. Ben Bernanke has
suggested not long ago that what might be needed is a
coordinated fiscal and monetary expansion to get inflation up. And I have no
personal view on that. It’s outside my skill
and understanding. But one reason–
there are two reasons I can see why governments
might want to get inflation up in the current situation
that Japan’s in. One is that inflation
actually acts a bit like a– it improves fiscal
sustainability because it
fundamentally improves the tax returns because
most of the tax base is linked to nominal income. It also reduces the real value
of the existing stock of debt. And it’s hard to underestimate
the size of that impact. It is not trivial. So the existing stock of debt
in real terms when you repay it is less if your inflation
rate going forward is double, which is what
the government’s after. So it improves fiscal
sustainability, inflation. Another one that
Ben Bernanke argues is that potentially the
equilibrium interest rate in Japan consistent
with full employment is negative the
real interest rate. And the only way to get
a negative real interest rate when you [INAUDIBLE]
bound is to have inflation. So you might need inflation to
get closer to full employment. I guess I should finish up these
sort of random thoughts, one more reservation on the
supply side as an economist, supply side reforms
are always good. It’s the long runway
of improving well-being for the populations
that we care about. One of the things I
got from your slides though is this real
question in my head, does an aging population
make it easier or harder politically to do reforms? Some of the traditional
areas that people talk about in Japan’s economy
which could release resources. The other parts of it
include the retail sector and agriculture. Would those– is
reform going forward going to be easier with
fewer workers in those areas or harder, given their age. I notice that older workers
become less productive. I wonder whether they become
more radical in their views about supply side
economic reform. So with those sort
of comments, I’ve got four sort of questions for
you, Uri, if you don’t mind. You don’t have to
answer to your comments. You already have
made ten comments. [LAUGHTER] [INTERPOSING VOICES] I apologize. Yeah, yeah. Please, I think. There so many comments. Thank you very much indeed. [INTERPOSING VOICES] It’s a very, very sophisticated
comments for Japanese economy, all the comments. And yeah, sustainability
of the debt, it’s a very, very severe
issue for Japan. But today, JGB has
been financed by the– 90% from the domestic market. And also the Bank
of Japan, you know adjusted to control the
long term interest rate. And also, these
two points are very important to the
[INAUDIBLE] interest rates. But I think in the era
of the elderly people are going to increase,
the saving rate Japan is decreasing. And I think the JGB buyers are
going to be more from domestic to foreign countries. So it is very [INAUDIBLE],,
it is a very, it is more, just a little bit nervous
situation in the future. So Japan must struggle with
the debt problem, fiscal debt problem, in the
long term, I think. And about the labor
force, I think the new technology is helping
women to attain the workforce, as you said. I think today in Japan,
the [INAUDIBLE] work is wider, especially in the
[INAUDIBLE] companies or so. And also the Abe
Administration says, as I said it has women
can continue the works and social help for the child
care or [INAUDIBLE] care is very important. So this is a core, one of the
core of the new Abenomics. So, and also the
government has set a goal to raise the proportion of
women in leadership positions to about 30% by 2020. Of course, most companies are
likely to achieve their goals. But the labor shortage is just
to encourage the women to enter the working market and
also the new technology support this tendency, I think. Can I interrupt a little bit
so that maybe, there are so many questions out there. We have some time to think. I’ve been told a little
bit about the [INAUDIBLE].. I think your point about the
new technology and labor market is a really interesting topic. And it’s really related to you
know how the aging society is more promoting the reform. So on that, that’s a
really interesting point. So it depends on the technology. Because you know we really
know as you mentioned that the working age
population is shrinking so the GDP is smaller. But it’s not the
end of the story because there’s too many people. So we need to maintain the
consumption, kind of the life standard. So yeah I think a lot of
people think older people don’t like the new technology. But maybe in Japan, because the
new technology may help Japan. So maybe helping the shortage
of maybe the prime age working people. So especially, I
talked with Okinasan, so it’s interesting
thing is, I’m not quite sure whether
fintech is really helping the older people. But now Japan is one of the
most [INAUDIBLE] But [INAUDIBLE] So that people tend to– maybe the Japanese
government would like to follow what has
been done in the past. But if it’s really new new
technology, there’s no history. So they may be able to
accept rather easily, especially that
kind of technology can help the shortage
maybe the working age population or something. Do you agree to that? Yes, I think so. Of course, there is some
integration for the [INAUDIBLE] but as for open API
or something like that to connect fintech
companies to banks, it’s a very, very early
country in the world to make easier to connect
each other by using the open API [INAUDIBLE]. And also just we are
preparing the sandbox for not only the
fintech companies, but also the companies
that want to use the new technology, but the
regulation, it’s very gray. But I think that
Australia has already had sandbox technology,
sandbox, I think. And so yes, Japan is very
eager to promote the design innovations. So truly the existing
kind of things like exist in
regulation, maybe Japan is really stubborn country
and rather hesitant to accept new ideas. But for new technology,
and especially the [? infacing ?]
of this [INAUDIBLE],, you know, maybe you know
Japan can be a country which accepts new technology. And [INAUDIBLE] would like to– You want to say something? I have a question when you– OK, not yet. Not yet. There are so many questions. Not yet. I come back. And I come back
to your questions. And you have questions. So now is the time to go for
questions or maybe all right. Maybe– Yeah, let’s have a conversation. So do you want those
four questions? Oh, yeah. Yeah, let’s go to the questions. So these are the
completely unprompted ones. So why don’t wages
increase in Japan? Why don’t wages
increase in Japan? Ah, wages don’t really increase
because so many part timers are increasing in the labor market. So as you know that Japan’s
unemployment rate is very low. And you know that many
elderly people and many women are coming into
their labor market and the foreign-are
workers just coming this very large amount of
labor, foreign laborers are coming in from Vietnam
or Nepal of Philippines, and so on. And they are working
as technical trainee, technical intern trainee,
that’s a qualification and also they are just a
student to take a part time job. And the labor shortage is just
a little bit not so tight. But wage level is not so high. And also, I think
that many companies have been very
cautious to raise wages of regular workers
because of the anxiety of our future prospects of
the business environments. Yeah, maybe if you
don’t know much about the Japanese economy. Think about the economy you
know 2% unemployment rate. It’s really low, you know. So if you want to get 100 people
would like to get the job, 98 people can get the job. But still wage is
not increasing. So it’s really puzzling. But you think,
you said that, you know because of the
increase in part time or maybe increase in
foreign aid workers? But will it continue forever? Sometime in the future, do
you think wages will increase? Or maybe we’re going to
continue this kind of situation for the foreseeable future. I’d like to know because we can
say [INAUDIBLE] it’s increase but what we’d like to know when. If it’s 20 or 30 years,
it doesn’t make any sense. But do you have any
kind of an estimate? I’m sorry. It’s really difficult to tell. But I want to have
some clear figure about that kind of thing. I have not just examined
when the wages will increase. Yes. But I think, participation
rate of women are very much
increasing these days and also the elderly
people of course, began to participate
working in the labor market. But the boardroom
is very not so much compared with the
labor shortage. So I think that wage is
increasing in the future, maybe in five years
or four years. That’s not necessarily,
may not good news. Because people are
wanting to have an increase in
their wages, that’s going to increase
in inflation rate. But that may increase
inflation higher. And maybe the government that
the problem may be larger. So I think in the
future you know, when wags really
increase, should be a very important issue. And we cannot take
it as a good signal. I think so. At that time, we are struggling
with that supply side reform or fiscal reform. I mean, in the
long run wages are linked to labor productivity. But in the short
run, and this seems to be not only Japan
but other countries, advanced countries
as well, where wages have been suppressed. And the good thing
about being an economist is you can use
the same framework in different countries and
just tell the same story but in slightly different ways. [INAUDIBLE] There is something about the
augmented labor supply curve here where we thought the
labor supply curve was in one position
and it looks like, whether it’s because workers
are coming back into the labor force from family life or older
workers are working longer, whether it’s the supply
of migrant workers, whether it’s something
about technology helping workers sort
themselves or do jobs, people with
disabilities et cetera, do jobs that wouldn’t have
been able to be done before. The supply side of
the economy seems more robust in
advanced countries than we probably gave it credit
for before this happened. And especially I [INAUDIBLE]
too much, but transportation technology,
information technology, it would be very interesting. What is the nightmare about
the Japanese life is commuting. You know it’s torture. Two hours of the
congested train. So that if the thanks
to the information technology or some
[INAUDIBLE] right, maybe not have to be a 1,000 kilogram car. But the right car for
one person or something. You know if we can
commute much more nicely, then maybe we can increase
labor productivity or something. So that that’s
definitely related to the supply kind of things. So again, it’s related to the
new technology kind of thing. There’s one more
major effect, which is if workers are being shaken
out of one part of the labor market, and then they
might move, skill-wise, technology change, they
might be moving down into the lower parts
of the labor market to do jobs which they
previously weren’t trained for and again pushing down
wages in those parts. So the income
distribution may be changing even though the
employment may not be. Yeah, especially
this is something we discussed, somebody I forgot,
but maybe new technology, the gain from new
technology, a lot are concentrating on a
smaller number of the parcel, maybe the [INAUDIBLE]
wage is going down. So only the one incredibly rich
people and others are poor. So you know, that
kind of issue must be also important for the
wage dynamics in the long run. Any more questions? I’ve got one more. Please. How are regional banks and
others managing in a zero interest rate environment? Yes. I think that there are many
regional banks in Japan. And there are three mega-banks,
like Sumitomo, Mitsubishi, and [INAUDIBLE]. And these regional banks are
not diversified like mega-banks and the rate of fee
income is very small. So therefore if the zero
interest rate continues in long run and interest rate is zero,
they cannot earn interest. So Mr. Phillip Lowe
is the governor of the Australian
Reserve Bank, says that [INAUDIBLE]
environment characterized by [INAUDIBLE] interest
rate may dampen the profitability of the
strength of financial firms and could change
the firm’s incentive to take risks, which endangers
additional financial sector [INAUDIBLE]. This perception is exactly
the case in Japan, I think. So we must monitor carefully
the financial markets, I think. And especially the recent
bank issues related to the government debt program. You know, there are
investment opportunities, the government debt. So it’s true that
a lot of people think that 90% of the
JGB is held by Japanese. So it’s just a distribution
problem within Japan. You know it’s a significant
portion of the JGB is held by the regional banks. So it may be related to
the financial crisis. So we know, everybody knows
that the financial crisis can have severe consequences. Yeah. I think, what’s going to happen
to the regional banking system? I’m not expert on
the banking system. But that’s also one
of the big issues, how we can proceed with
reforming our regional banks. Some countries have had
negative interest rates and have managed OK. I’m just wondering
why, what Japan– it’s just a question
of why Japan might be the more sort of
averse to it than others. I think that some banks in
[INAUDIBLE] deposit interest rate for large
customers to negative so they can under interest, the
banks themselves are interest. But Japan, it is very difficult
to set deposit rate negative. So it is very, very
unpopular policies. [INAUDIBLE] G4 banks. As you know, even though we call
it a negative interest policy, but it’s not the real
negative interest policy. Good point. Because there’s a [INAUDIBLE]. If we make a deposit, but
the interest rate is 0.1, do you want to get
everything in cash? No, it’s OK to keep it. So that’s a zero
interest policy. So I believe that,
by definition, it shouldn’t have a huge
impact on the macro economy. Because why we can maintain that
[INAUDIBLE] interest because it doesn’t change the behavior
of the economy [INAUDIBLE].. So it’s just a tiny thing. But in Japan as Okinasan said,
that somehow the banks cannot change the deposit
[INAUDIBLE] therefore, it’s just a shrinking
error margin. So therefore, the
[INAUDIBLE] banks [INAUDIBLE] So one more? Absolutely. One more, two more, three more. And this is a
political question. Will the consumption tax
be raised from 8% to 10% in September, 2019? I think that a
coming consumption tax will go up next autumn
I think as expected. As you know, that the current
consumption tax is 8% in Japan. And but it is planned to
raise it to 10% next year. And first time, Abesan
raised the consumption tax from 5% to 8% in 2014. And Abesan was criticized from
the low income sector people that it was a very huge
impact for their income. And at the same time as
health insurance premiums also raised at the same time. So it is said that
consumption in Japan it’s just a little bit affected
by the hike of the consumption tax. However, this time, the
range of the increase is 2% from 8% to 10%. And so we think that it
would be possible to avoid a large consumption
deterioration I think. Yeah but, you’re the expert. According to [INAUDIBLE] one of
the greatest macroeconomists, he has done the research
on the Japanese. How much the consumption
tax to increase to sustain– 30%. 30%. You know so it’s not just
about 8% kind of thing. [INAUDIBLE] Oh, yeah. I’m sorry, sir. I totally agree with you. 10% is very
insufficient, I think. That’s right. But still we are struggling
to raise that kind of thing. And I’ll come back to that
depressing 30% number later. OK. OK. There are so many issues
to discuss and not that much clear solutions. So you’d like have some
questions from the floor. It’s a nice chance
to have a– yeah. This is an extension
of a question answered by Mr. McDonald, but towards
I’m sorry if I mispronounce the names, Mrs. Okinawa. Okinora. Nor Okinawa. Okinora. And Professor Fujiwara. Think you. In 2013, if you recall the
GDP, I mean debt to GDP ratio for Greece was about 177%. The debt to GDP ratio in Japan
in 2018 is around about 240%. In your opinions,
what do you think is preventing a financial crisis
from happening and a default on, not necessarily
default on debt, but from the debt
bubble bursting? I think– thank you very
much for the question. The government said
that primary balance, do you know that
primary balance is just a expenditure just the
expenditure in tax balance is going to be balanced to 2025? And from that timing,
the government says, its JDP, debt to GDP ratio is
just going to be decreasing. So if the government can do
such a very difficult task, to cut the expense, to cut
expenditure due to increased tax, and also to make the
gross strategy successful, maybe it’s a very
narrow path but maybe Japan can survive with that
very huge debt, I think. Can I join you a little bit? A difficult thing in economics,
it’s always about expectations. So as long as you know,
somehow the government do something in the
future, if you believe that, that’s totally OK. But whether we can really
believe, that’s also an issue. Also, I think
Okinasan implicitly showed in her figures, you
know, that’s a growth step. You know a lot of JGBs. Are held up by the
governmental institutions. So in net, it’s like 100. 100 or so 100 something. So it’s going to be
significantly lower. So maybe still we can
say it’s marginally lower than the Greece thing. And also that the difference
between Greece and Japan is that Japan is still the
country with the highest net foreign asset. We are not borrowing
from the foreign country. Of course you know,
it doesn’t matter. It’s a really
difficult question. But usually the crisis coming
from the foreign investors. foreign investors cannot
believe the foreign country. They try to sell them debt
or something like that. So the Japanese situation
is a little bit different. But I’m not totally
answering your question but maybe I totally
agree with Okinasan. It’s about expectations,
about the future [INAUDIBLE].. So the credibility of
the government is– Do we have it? Yeah. Yes, of course. Yes, of course. We need to go back to Japan. [LAUGHTER] There is some math involved too. So it’s basic debt
dynamics is the growth rate of the economy going to be
higher than the interest rate payments? When your interest payments
start to get higher, that’s when markets realize
that you’re in a bit of trouble. And that’s why
those three things that I mentioned at the
start are so important, because they’re the things
that keep interest rates low relative to the growth rate. And it is also why the
supply side of the economy is fundamentally the
answer to the problem. Because you’re got to growth up. And Greece was in– Greece didn’t have
those characteristics I mentioned at the beginning. They had their debt
denominated in a currency which wasn’t their own for starters. Yes? Thanks. So I just want to come in on
a couple of those issues you left off on. I’ve enjoyed the
conversation a lot. But about government credibility
and reform credibility, because Okinasan showed
quite nicely the three arrows in 2013, the three
new arrows in society 5.0. Now the first
three arrows seemed to make sense only
if you undertake the third arrow,
structural reform, the supply side reforms which
you’ve been talking about. Now I think the first
arrow is quite easy. Just tell the Bank of Japan to
effectively print more money. Second arrow is easy. Government can spend
money, that’s fine. Delay a consumption
tax increase. But the third arrow is the key
arrow to lift the potential– the productivity and the
potential of the economy. Instead of succeeding
on that, and there was a little bit
of progress, you move to the three
new arrows, which seem like part of the
third, part of the supply side reforms. And they’re important. But you sort of– it’s great PR for Abe. Marketing has been fantastic. Every few years, roll
out a new strategy. But even on these,
I think there’s been pretty minor progress,
pretty marginal progress. There’s still
shortage of childcare is in some places,
which is unimaginable given you got a shrinking
cohort of children and babies. And the social security
reform that was so important just haven’t been undertaken. But it seems all the solutions
now that are being talked about are technology related. And some of the
problems are going to be addressed by technology. But there are some pretty
obvious big reforms that should be undertaken
surely and the government’s sort of committed to. Now the unemployment rate is 2%. It’s very low. But that is people are looking
for jobs who can find jobs. There are pretty big
distortions, tax distortions and disincentives for
spouses, usually women, to work more than what is about
$13,000 Australian, a year. That seems like a
ridiculous tax cliff that is keeping women
out of the workforce when they want to work more. That’s an obvious one. The childcare shortage is
another obvious reform. There seem to be some
fairly obvious reforms that are holding the
economy back given the big headwinds you are seeing
with the demographic change. I guess my question is,
is the government doing enough on the supply
side reforms or are we just getting by, the
debt continues to build. Maybe you don’t
default on the debt, but you get out of it with rapid
and very, very high inflation eventually and very disruptive. I just can’t see this
sustaining, this situation sustaining, without more
reforms that actually expend political capital. Yeah, As for the
regulatory reform, because I had been working
for the Regulatory Reform Commission for many years,
in the easing of regulation in the fields of such as
agriculture or medicine, initially made progress in the
first the first era of the Abe Administration, I think. And maybe you think of
the Japanese agricultural cooperatives it’s
a very, very strong you know political
power in Japan. But Abe Administration
at the first time [INAUDIBLE] with
agricultural cooperation at that time and to pursue the
reform the agricultural fields. And also the Japanese
doctors association have very big power but
they are very corporate– they are in complete cooperation
with Abe Administration because Abe Administration
have the political power at the first time. So it depends, in the future, it
depends on the power of the Abe administration, I think. Maybe I think Abe’s sound was
one of the most [INAUDIBLE],, one of the prime ministers that
struggled with reform in 10 years or so I think. But it depends on the political
position and political power, I think. So is this– Can I join you a little bit? I think it’s related to,
again, the final point about the supply side
reform on the aging society. So again, thinking about aging
society and given the fact, older people tend to
go to the voting more than the younger people. And there are more older people. And if the older people are
happy with the current regime, you know, then they
don’t have to think about the fiscal
reform in the future. And they want to have a
right to maintain the right to go to the doctor any
time to meet their friends. Just thinking about
the political, policy, you know, the politicians’
rational behavior. You know I’m not saying
it’s not rational. Simply the rationality
of them is to win. OK? For that kind of thing,
maybe the dark side of the Jason’s comment,
that maybe aging society may prevent the reforms. But quite new things, maybe
there’s some new things maybe, we may adopt more. So that we are hoping some new
technology which we are not anticipating at the moment will
change the world or something. So I mean, as a policy economist
who works for government, no government ever does
enough economic reform. But I mean sometimes we
don’t give enough credit to just good stable macro
policy and a market disposition in the government. Because market economies change
and adapt regardless almost of what governments
choose to do. So I suspect that Japan like
Australia and the United States will have reform thrust
upon it through things like technological change,
which can jump borders and jump regulation despite governments
choosing not to reform or not. And so the dynamism
of the market economy can somehow sometimes
solve these problems with more coordinated
actions than governments can. A good example would be the lift
in the women’s participation, in Japan, which seems to
be an unexpected to many. We’ve now got a
higher participation rate in the United States and
equal to Australia’s and I’m not sure that came from
coordinated government policy, but just came because of
the market wanting it. And I think it is
very lucky for Japan because the labor
shortage is very severe so the new technology is
very, very easy to introduce in the society, I think. So in maybe economics
terminology, if the technology is
[INAUDIBLE] improving, you know, it makes
everybody happy. So there are that
kind of technology can be you know, maybe
surprise that reform can be accepted rather easily. But then maybe policy,
which may increase the majority of the welfare,
but somebody’s got miserable, then that kind of policy may
not be very easy to be accepted. I think. Just have two very quick
questions for Ms. Uri. First of all, thank
you for the plantation. It was very comprehensive. My first question was I guess,
we mentioned a number of times just a labor shortage in Japan. In near future Japan will
become a super H country. I’m just wondering, there
are different solutions, for example, we can see
more women in the workplace or technology can take a part. Just wondering,
would Japan concede a policy open for migration
from other countries? That’s the first question. My second one would be, I
think Japanese people work really hard and then some people
they tend to work long hours. I’m just wondering what those
long hours, the people who work in Japan reflected in
GDP or is any contribution to total economy in Japan? So I think the first
one is immigration. Could you let me know the
second one, is working long? I think– Because it’s not so
good, working long. I mean, a lot of Japanese
people, they work long hours. I have come across different
people or companies. I’m just wondering, those extra
hours that people work in Japan were those extra effort will
be reflected into the total GDP or you know, or contribute
to the total economy as a whole Japan economy. The second one is about
the measurement may not be very easy to understand. [INTERPOSING VOICES] The first one is how do I
think about immigration policy? Yeah. I think, would Japan
[INAUDIBLE] of that policy. Yeah. It is a very official
position of the government, the Japanese government,
that immigration, which means that by definition,
increasing permanent immigrants policy has not done in Japan. But, however temporary
foreign workers is increasing very much. Currently there are 1.2
million foreign workers and 600,000 people and more
has been increasing this five years. So in Japan, as I said, the
unemployment rate is very low and the productive
aging population is drastically decreasing. So especially
[INAUDIBLE] shortage can be found in [INAUDIBLE]
in nursing care, and retail, manufacturing,
and agriculture and so on. Maybe almost all
the [INAUDIBLE],, but especially in
these fields are very much has the
very much shortage. So as I said, many of the
acceptance of [INAUDIBLE] labor qualification of trainee
technical intern trainees. And with learning
skills in Japan and making it useful by
returning home country and not just for the labor
shortage, but to make you know the cooperation
with the international and international cooperation. And also besides that,
there are quite a lot people who can work as foreign
students and work part time. So together these
two [INAUDIBLE],, it reaches about 500,000 people. So at this situation, the Abe
Administration said in this term, that the labor
shortage cannot be dissolved. So the government decided to
establish new qualification and the study is
currently underway. And the extension
of workable period from five years to 10 years
or increase of the industries that can employ foreign
workers is being studied. But the government
said that they do not change their so-called
immigration policy is not the solution, just to
accept foreign workers more. But there are so
many discussions now. And maybe in autumn, some
discussions in [INAUDIBLE].. Regarding your second question. So your question reminds
me of the very famous book in the 1990s. So there’s a book
by the [INAUDIBLE] called the East Asian Miracle. Lots of people thought that
that’s a miracle kind of things happening in East Asia. But some macroeconomist
pointed out its just due to the
longer working hours. OK, so therefore, of course, if
you believe in a simple model, you know, longer working
hours increase the GDP. But what is a problem at the
moment is not just working is not enough. You know because in a catching
up economy, when we are there you know what to do. You just follow what the
[INAUDIBLE] for frontier countries are doing. Working longer hours may
increase your efficiency. But now what is needed
is more creativity, creating something new. So that is a conceptual issue. So maybe they are working
too many hours may reduce your productivity, then you
may have a negative impact to the output. But simply, if you believe in
the cost and the productivity that an increase
the working hours should increase the
GDP and that that should have contributed
to the high GDP in Japan in the past for sure. So, so GDP doesn’t
include an adjustment for the hours worked. It’s just the market value
of all output in the economy and the market
value of the output. Measures of [INAUDIBLE]
productivity conceptually should
adjust for it because that’s the amount of
inputs to go into producing it. But all of the measures
you ever use you need to look at carefully. Because the shift from
women in participation into the workforce and
moving out of unmeasured home production into
market production, which will be
boosting GDP as well. So that whenever you are
looking at your numbers, you need to think about
what’s actually going on and what exactly
they are measuring. And also can I add one
more important thing. So that there’s a concept
called home production. So in Japan you know,
lots of housewives you know prepare for the dinner. So that’s definitely
increasing your utility. So for example, if you want
to increase the GDP in Japan, ask your wife to work for the
neighbors and get the money. I think then we
can increase GDP. But it doesn’t
change the welfare. I think that there are so many
kind of things maybe related to the working hours. Yes. OK, so, yeah, yeah. I was going to actually ask
the question about the debt, but the kinds of things I
would have said were I said. I’m still– let’s go a little
further on this expectation idea. So here’s the situation. You know Japan has a debt to
output ratio, debt to GDP ratio that’s extremely high
and they’re selling JGBs at a very low discount,
which would seem to imply people don’t
expect there to be default. They don’t expect high inflation
and have that disappearing. You know you were talking
about the regional banks are holding these
things in large numbers, presumably in kind
part the deposits from their liabilities. And you know so why are
these regarded as so safe? I mean the idea that
Japan could have a growth miracle is a
very, you know, certainly not a certain event. And so why does it sell
at such a low discount? And you know, we were
asking about Greece. Well Greek debt was
held by Germans. Japanese debt is
held by Japanese. So it must be hedging. So the alternative is you
have those two big parts of the budget, you know
the servicing of the debt and the social security. Those are the two big things. So one of those has to go. Well if one goes, I mean,
maybe these are that– so I have savings
in the form of JGBs. If those are safe,
then they reduce– they raise my taxes and they
reduce my social security and health care benefits
when I get old, I’m good. If the JGBs default,
well then I have– then they’re going to give
me my social security. Do you think– is
there any evidence– I don’t know enough about Japan. Is there any evidence that that
may be how people are thinking, I guess is my question. So if you’re buying– your debt is the
[INAUDIBLE] currency and your future retirement
is on goods which are also going to be in that
currency, then maybe there is a bit of inflation, you
still get the normal value back even though the real
value may have fallen, that might give you
confidence to go buy it. Particularly relative to other
things you can invest in. If you want to
invest in US bonds, you’ve got the exchange rate
that you are worried about. So the domestic side, it’s
kind of rational in one sense for the domestic side of this. Despite all the returns that
are higher everywhere else in the world, to go and buy
those bonds, knowing that at some point in the future
they want to get that yen back and to buy domestic goods
and services in retirement. And if the normal value
is the same, great. And if the real
value has fallen– I think it’s kind of
rational at that level, which is Uri’s point, when
savers start to get old and there’s not as many of
them and they’re running down their savings, the marginal
investor becomes the foreigner. That’s when the issue
probably presents itself. Can I add that maybe
other because you are the general [INAUDIBLE] the
that into partial explanation. So why are still the people
are investing in a JGB? You know, I think they are
thinking about three recession after 1990s. It’s always coming with
yen’s appreciation. So somehow Japan has the
biggest country with the biggest net foreign assets. So when the global
economy is in a recession, Japanese yen tend to appreciate. So foreign investment is
a really, really risky investment. You know, yen becomes
really lo2 in a recession. So somehow we knew
that kind of thing from the three experiences. Even the burst of the bubble,
you know, yen appreciated. Even after the great
earthquake, yen appreciated. It’s really crazy you
know, because earthquakes happened in Japan. That’s a risk to
the global economy. So yen appreciated. So that somehow,
it’s a bit irony. But you know, of course,
thinking about the shrinking population, we should do
efficient foreign investment. That is necessary. But thinking about the
risk and the return. So the foreign
investment tend to be a really risky investment. Yeah. OK, so. Maybe Oki first. [INAUDIBLE] I’d like to come back
to consumption tax hike. So I was very glad
to hear you know, Okinasan is not
worried about too much. But I still have small concern. But you are not living
in Japan anymore. Actually, that’s my point. So, I moved from Japan
to Australia in 2014. So I have never experienced
inflation in Japan. And I did experience
inflation here. And I don’t like it. I hate it. [LAUGHTER] You don’t like inflation. Yeah. So I do agree, for many, you
know, young people in Japan never experience inflation. And you know consumption tax
hike is the only occasion they experience inflation. So I am expecting
they really hate it. So that’s the reason
that I have some concern. I also, you know, investment
relates to the Olympic games will be disappearing. So that’s brought
me in as a concern. So my question is, what’s the
quickest things or quickest policy the government do for
the next couple of years? For the consumption
tax and Olympic things. I see. Yeah. I think that– I don’t like inflation too. But, I think these
20 or 30 years, almost all the world
economy has not experienced a not so
huge, advanced countries, not experienced huge
inflation, but do experience a very large financial crisis. So maybe though,
people who live here were very against that kind
of bad financial crisis. So we just forget how harmful
that inflation is in Japan. And I think that the government
will be doing some stimulus by the financial expenditure. I think at the timing of the
rate rise of consumption tax I think. But I think it is
inevitable, but I hope that this
expenditure will use that very appropriate uses for
the Japanese you know growth, I think. And after Olympic
games, it is very– there are so many events in
Japan, maybe Tokyo or Osaka. It’s rugby. Yeah. This is most
curious that there’s a Rugby World Cup next August. Yes, there is not
so many events. And, but I think [INAUDIBLE] is
one of several important issue that the Japanese companies
and Japanese society will to use and to improve
the productivity of Japanese economy I think. So I don’t– I’m probably a bit
different in the sense that I don’t mind
a bit of inflation. In the new Keynesian kind of
models where there’s downward normal wage rigidity, a
little bit of inflation helps structural adjustment,
because real wages can be reduced without
anyone doing anything in those parts of the
economy that need to shrink. And nominal wage
gains can be higher in those parts of the economy. And therefore real wage
gains can be higher in those parts of the
economy where you do want more productive workers. So a little bit
of inflation helps that structural
adjustment process without politicians having to
close down certain industries and open up other ones. So that’s one positive about it. The other one is the
increase in the GST will, in present value
terms, fundamentally improve the fiscal position of Japan. And a 2%, a one off increase
in the price little of 2%, we roughly did that
in Australia when we introduced our GST in 2000. And we sailed through
it without an issue. But it does reduce the real
value of the outstanding debt. Last thing I’ll say is,
these questions about when to change major changes
to the tax system are differently answered
for macro positions depending upon your
macro position. And Japan is closer
to full employment. And so the kind of, what’s
the impact on expectations might be different
to what it was in the previous increase
which economists think was a bit of a problem. OK. So there we have
about one question. Do you have any more? We would like to have one
more question or something. OK so this is the
final question. Thank you very much. I’m honored. I’m Joel Rathis
from the Treasury. Thank you very
much for the panel. I have a question about
fiscal and monetary policy. It’s actually two questions,
but they’re very similar. So we’ve talked about
Japan’s consumption tax being scheduled to increase
from 8% to 10% next year. And let’s assume
that that’s what happens, that it
doesn’t get postponed, which has happened in the past. And you mentioned before,
Japan’s fiscal strategy of getting to a primary balance
that’s balanced by 2025. So there’s an imperative
to raise this tax or a tax. So Uri, or Okinasan,
imagine you are the governor of
the Bank of Japan, and you’ve had to already sort
of let the rate around the 10 year bond, the range
move from 0.1% to 0.2%, so sort of maybe allowing
a little bit higher because there’s pressure
in your financial system, these regional banks
we talked about. And also you can look
at the United States you can see their trajectory. All right, so you
can see maybe you’ve got a bit of tightening that
you may be tried to do there. And at the same time
next year, you’re seeing a negative
fiscal impulse. As an economist, what is
it that you’re going to do? Do you want to keep that
path of normalization or sort of slow normalization
that’s outlined in the Bank of Japan’s current
statement on monetary policy? How would you approach managing
that negative fiscal impulse. And two, the second
but related question, imagine that specifically,
you’re [INAUDIBLE] Kuroda and you’ve been reconfirmed. Prime Minister Abe is
still the prime minister. You’ve known this man
for 10 years, long time of working relationship. In that circumstance,
what would you do? Would you think about
doing anything differently because you might be able to
leverage that relationship, have a closer coordination
between fiscal and monetary policy than might be possible
in other parts of the world? And if you’ve the time,
a comment on growth, impacts on growth. Thanks very much. Thank you very much
for your question. It is a very good question. Thank you so much. I think that the inflation
rate will not so [INAUDIBLE] to reach 2%, maybe not
in a few years I think. Maybe it takes, I
don’t know exactly. But it takes four or
five years, I think. So maybe, I think it is
a very, very slow speed to pick up the long
term interstate to the normal position I think. So it is a very important
period for Japan. In that period that the
structural reform must be done and also the fiscal deficit
cut or something like that is very important to be done
in that period, I think. So maybe these
four or five years is very, very important
when the Bank of Japan can control the
long term interest rate a little bit later, as
compared with a normal level I think. And as for the second
point, Abesan and Kurodosan is a very good relationship. And Abesan is maybe, I think,
have a very good confidence with Kurodosan’s
monetary policy. But Kurodosan, from the
viewpoint of the Kurodosan, I think, he is very
anxious about the speed of the fiscal
deconstruction and also the structure reconstruction. So I think that Kurodosan is
just is in severe position compared with first Abe
Administration, I think. OK so time is up. And I thank you very much for
your active participation. Please join me in
thanking [INAUDIBLE].. [APPLAUSE]