OSAKA – In the run-up to the Group of Twenty Leaders’ Summit in Osaka in late June, several related meetings of what are known as engagement groups are scheduled to take place in Tokyo and around the country. One of the more influential engagement groups is T20, or Think 20, whose members include influential think tanks from various G20 nations and which aims to provide leaders with expert policy advice about global challenges and issues.
In an interview with The Japan Times, Naoyuki Yoshino, T20 Japan 2019 chair and dean of the Asian Development Bank Institute, discusses the role of the T20 in this year’s summit:
With the rise of protectionism and growing economic inequality among many of its member countries, there is much talk about the G20 process being in peril. How can the T20 help the G20?
Given the current political environment, there is a big opportunity for the T20.
The recommendations of T20 will be based on theoretical, empirical analysis grounded on our original reports and findings. Even if we reach different conclusions from other international organizations, we can explain the reasons behind the recommendations.
For example, in regards to Japan, the International Monetary Fund is proposing that fiscal policy is important for Japan. However, our analysis is that fiscal policy is becoming very ineffective in Japan because of the aging population.
Fiscal policies mobilize the unemployed, giving them income so they can raise the consumption level. However, Japan already has almost full employment.
In addition, the elderly are already outside the unemployment pool, with a large population of elderly who have already retired.
Therefore, fiscal stimulus programs will only bring us a shortage of labor, which is what is happening now. That’s why there is talk about introducing more foreign workers.
But what is needed is a policy on how to utilize elderly retirees. It’s crucial to bring them back into the workforce, rather than keeping them retired where they just receive a pension and social security. If that continues, our budget deficits will keep rising.
The IMF reported that Japan should promote fiscal policy because apparently the aging population is not a big problem in their model. Furthermore, the IMF assumes that the capital market is working perfectly.
Based on those assumptions, their conclusion is correct. But our assumptions are based on the current Japanese situation, and I can show, empirically, why our conclusion is different.
So our recommendation is to have people work longer in life so they can continue contributing to society.
In T20, we can have discussion about different conclusions based on our own research. But in the G20, there are no such discussions because their discussions are politically oriented, and not based on theoretical models or empirical research.
That’s one of the problems of the G20.
Do you have any hope that Japan, as host nation, will make the issue of aging societies a priority for discussion among all of the leaders?
I think most G20 countries don’t face an urgent aging problem. The IMF sits in Washington, D.C., looking at various countries. If the United States faced the same situation with aging, the IMF might analyze their situation and come to the same conclusion as ours.
The same thing happened after Japan’s bubble economy crashed after the late 1980s. During Japan’s period of prolonged stagnation, the U.S. made a lot of suggestions to Japan that didn’t solve the problems.
But after the 2008 global financial crisis, the symptoms of the U.S. policy became very similar to Japan — the U.S. studied and learned from the Japanese experience.
In the G20, if each member isn’t facing a particular problem, they can’t think about the problem seriously. And the models that propose solutions to the problem are quite different.
The same could be said about trade and the G20.
It used to be that although each country’s politicians had their own objectives, they also gave thought about the globe as a whole and negotiated the best solutions when they got together. They then brought those solutions back to their respective countries and convinced their people to follow the agreements. That was the role of internationally respected politicians. But there are fewer politicians like that these days.
Another problem regarding many trade policies is that they tend to be focused on short-term gains. A politician’s term is only four or five years, in the democratic G20 nations at least. So they only think short-term. In the finance sector, we’re looking at 20, 30 or 50 years.
One of the reasons for the current backlash against multilateralism has to do with things like financial waste, corruption and transparency.
Corruption is not a major issue we are looking at this year in T20, but we’ll be talking about transparency and governance.
What specific initiatives, then, regarding transparency and governance do you think T20 will offer?
I’m in charge of infrastructure investment. In many countries, construction of roads and bridges can suddenly stop. Sometimes contractors have been chosen without transparency.
The importance of transparency and governance is in infrastructure investment. Here, international organizations will play a very important role, especially in finance.
The World Bank, Asian Development Bank and various international development banks should be involved to monitor and govern all of the structures. That’s transparency.
If the older projects were financed by domestic finance and the private sector, then it’s very difficult to watch what’s going on. Governance is difficult. So the role of international organizations is very important.
The T20 has several task forces, with one of them focusing on global financial instability. Recently, you wrote that “lessons learned from the global financial crisis 10 years ago will be included” in T20 discussions this year. What are the main lessons?
First of all, compared to the 2008 global financial crisis, financial transactions have become much faster. Everyone can more easily access international financial products. With a mobile phone, I can access any product in the world. I can buy treasury bills, treasury bonds, European commodities and so on. That’s happening in many Asian countries.
So that means, first, that capital flow is very quick, due to mobile technology — therefore capital uncertainty will become very big. We have to stabilize those uncertainties so that sudden capital flows can be avoided.
Otherwise, the exchange rate becomes very volatile. In this environment, a financial crisis could spread very quickly.
Second, there is no international organization that can detect and catch illegal transactors, including internet hackers.
On climate change, you have discussed a “regional circular and ecological sphere” that “optimizes the use of regional resources.” Could you elaborate?
For example, traditionally, electric power was supplied by big dams that served many regions. However with recent technology, small rivers and small generators can produce enough electricity for a village or a town — meaning that more regionalized power could be produced.
Many island nations have introduced solar or wind power that can provide enough electricity for the daytime. With new technology, development of localized green energy becomes much more efficient and possible in many regions.
We’re going to propose those regionalized green energy projects for many countries and many villages. Cambodia, Vietnam, Indonesia and the Philippines have so many islands, but not enough electricity. These projects would be most suitable for them.
Another issue T20 is looking at is Africa. After the G20 Osaka Summit in June, Yokohama will host the Tokyo International Conference on African Development summit later in the summer. The head of the African Union will be at the G20 and, of course, African sustainable development issues have long been important topics of discussion.
Last year, there were actually people who asked: “Why do you want a T20 task force for Africa in Asia?”
My explanation was that Africa is now growing. Asia has had very good economic growth over the past 20 years. So for Africa, it’s beneficial to look at the lessons from Asia. Africa could learn the good points as well as the shortcomings of the economic development. There are a few lessons I suggested Africa could learn.
The first is the importance of the accumulation of domestic savings. In Africa, savings rates are very low. People would say, well, Japan and Asian economies have already developed and that’s why the savings rates have increased.
But when I looked at Japanese history, during the Edo Period, nobody saved money, especially the samurai class. They didn’t have any savings. That was their custom. So, I told people that, in fact, historically, Japan did not have a custom of saving.
That changed through education and the creation of a savings system.
At the beginning of the Meiji Era, Hisoka Maejima founded the postal savings system. He then asked a prominent Buddhist monk to help with the nationwide appeal to save money, but was told that saving money was not a good custom for Japan. So, Maejima started a primary school, where children learned to save small amounts of money. The savings would accumulate for six years.
When I mentioned this story to African people, they understood well and, obviously, that kind of savings they could start today.
The next step for Africa is infrastructure investment.
What kind of investment?
First of all, transportation, especially railways, in order to connect the agricultural regions to the markets domestically, as well as overseas.
In addition, Africa needs finance for startups and small and medium-sized enterprises (SMEs) and startups. This will help to mitigate income disparities. And we especially need startup finance for women.
We are calling on G20 for much more investment in these areas.
In terms of railways in Africa, is anybody in T20 talking about the possibility of a trans-African shinkansen, or some big modern train system that might connect, for example, Egypt to South Africa?
Not yet. First there needs to be a basic railway system, including passenger trains and cargo trains. Cross-border connectivity in Africa is now very important. The next step would be a shinkansen.
Which of the various areas that T20 is looking at do you think will be high priority items for discussion at the G20 summit?
The true definition of “infrastructure quality” is how it helps develop a region, mitigates income disparities, supports SMEs and promotes female participation in the workforce. That will be an important topic for the Osaka summit.