• Kyodo, Jiji

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The digitalization of society is essential to boost productivity for future economic growth in the "new normal" driven by the novel coronavirus pandemic, a government report said Friday.

The economy can return to a "self-sustained growth track" with a highly productive supply system if investments are promoted in information technology, software and human resources and there is sufficient demand for such investments amid the virus outbreak, according to the white paper on the economy and finances for fiscal 2020.

Noting the continued expected decline in the productive-age population, the annual report said, "Raising the level of economic activity swiftly along with protecting employment are the most important tasks" while trying to prevent the spread of the virus.

To achieve this goal, the report said, people are now required to change their way of living and working style to the "new normal."

Promoting digitalization to improve efficiency has been a signature policy of Prime Minister Yoshihide Suga since he assumed his post in September, with the aim of eliminating massive exchanges of administrative documents and stopping the use of hanko seals.

Such practices have been criticized as outdated and risky due to the possibility of spreading the virus as they necessitate face-to-face interaction.

To boost productivity and promote working style reform, the report urged businesses to continue implementing teleworking and staggered working hours, which have become widespread since the virus outbreak.

The report also said it is "essential" to improve employment conditions for women to enable them to continue working while raising children, and noted the need to increase men's involvement in child care by restricting long working hours.

Assessing the impact of the virus on the domestic economy as a whole, the report said it was in an "extremely severe situation" but that there have also been signs of pickup in the consumption of services such as travel and dining during the summer.

Analysts expect the Japanese economy to grow by more than 10% on an annualized basis in the July-September period, with economic activity gradually resuming.

However, downside risks remain given the resurgence of the virus abroad, the report said.

The report said the coronavirus outbreak is estimated to have pushed down personal consumption by some ¥31 trillion in April-June on an annualized basis from the level projected based on household income and assets.

The figure is far larger than ¥5.5 trillion in lost consumption in January-March 2009 due to the global financial crisis and ¥6.5 trillion in January-March 2011 caused by the massive earthquake and tsunami that devastated coastal areas in northeastern Japan, according to the report.

The white paper also estimated that the manufacturing industry had some two million surplus workers and the nonmanufacturing industry had four million such workers in April-June.

These developments require Japan to act to prevent deflationary pressure from becoming apparent, the report said.

The annual report also showed concerns over the possibility of deterioration in corporate earnings over the next year pushing down capital spending.

A fall in growth potential reflecting a drop in capital expenditures could lead to a loss of wealth in society in the medium- to long-term, it said.

But the report said the economy is showing signs of picking up after hitting bottom in April and May due to the fallout from the coronavirus crisis.

Referring to the economy's second-longest post-World War II expansion that lasted 71 months through October 2018, the report said a rise in the number of female and elderly workers at the nonmanufacturing industry brought stable growth.

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