Beyond the OECD challenge

Fifty years of membership in the Organization for Economic Cooperation and Development have seen Japan rise to one of the world’s largest economies. Today, both Japan and the Paris-based organization face similar challenges of staying relevant in the global economy amid the expanding clout of emerging powers.

Japan joined the OECD on April 28, 1964. In the 50th anniversary year, Japan is hosting the organization’s ministerial council meeting on May 6-7. Prime Minister Shinzo Abe plans to attend the session and deliver a keynote speech.

Half a century ago, accession to the club of wealthy nations was a significant event that cheered up public sentiment in a country that had just entered a period of rapid economic growth after rebuilding itself from the ashes of the war’s devastation. Created in 1961 on the framework for the post-World War II reconstruction of Europe, the OECD is often called the world’s largest think tank, providing policy analysis and proposals in a wide range of areas such as economic policy, trade, investment, education and development aid.

In the process of its accession to the OECD, Japan’s policy of protection for its domestic industries was a source of concern for the organization’s European members. After joining the OECD, Japan considerably opened up its economy and liberalized the movements of capital. As OECD secretary general Angel Gurria remarked in a recent symposium in Tokyo, Japan developed over the 50 years from a nascent industrial power to one of the world’s largest economies.

Japan was the first Asian country to join the OECD. Gurria has stated that Japan’s accession helped OECD become a more global organization with strong ties to Asia. Still, the OECD’s only other Asian member today is South Korea and the many emerging Asian powers that drive global growth today — such as China, India and Indonesia — remain outside the organization despite accounting for a rapidly growing portion of the world economy. Clearly the relative weight of the OECD and of its members is declining.

These non-OECD economies tend to keep a distance from international organizations still dominated by Western powers and put more priority on new venues such as the Group of 20, where they have a greater say.

Russia was negotiating for accession to the OECD until the talks were suspended following its annexation of Crimea. Now barred from the Group of Eight, Moscow is likely to put more emphasis on the G-20.

Japan may be in a position to serve as a bridge between the OECD countries and other Asian economies that do not belong to the organization. But to do that, Japan needs to rebuild its presence on the world economic scene — by first reforming its own economic structure and beefing up its capacity for growth.

In its policy proposal released this month, the OECD pointed out that Japan’s rapidly graying population and declining workforce are increasingly weighing on its economy, and called for a comprehensive set of measures to rebuild the nation’s fiscal health and review the pension, medical and nursing care systems.

As it celebrates its 50 years in the OECD, Japan needs to effectively respond to these tough challenges.