A new government report said Japan needs a “resilient” economy to overcome new challenges, citing the need to look for ways to curb the coronavirus spread while simultaneously promoting economic activity and implementing reforms to improve the business environment.
With the nation still struggling to contain the pandemic and unable to focus on economic revival, it is vital to build a flexible economy capable of responding to emergencies such as supply chain disruption and climate change, according to the white paper on the economy and finances for fiscal 2021.
At a time when the domestic economy remains “on a recovery phase but its pace is moderate,” the annual report said the country needs to address three pressing issues: balancing COVID-19 measures with economic revitalization, strengthening supply chains and promoting business restructuring and labor market liquidity.
The white paper calls for practical ideas such as using vaccination certificates to revive consumption and help support corporate activities.
The government said last week that more than half of Japan’s population has been fully vaccinated against COVID-19, with the inoculation rate finally catching up with the United States, Britain and other major economies after a slow initial rollout.
As for supply-chain disruptions, new measures are needed to deal with shortages of key products such as semiconductors and auto parts — both of which were affected by the pandemic in Southeast Asia.
The report calls Prime Minister Yoshihide Suga’s pledge to achieve carbon neutrality by 2050 and the establishment of the Digital Agency a “big first step toward reforms,” which has prompted firms to invest in digitalization and decarbonization.
The country’s real gross domestic product, which shrank last year due to the economic fallout from the virus, is expected to rebound to a pre-pandemic level possibly by the end of this year, it said.
The report comes before Wednesday’s vote for the ruling Liberal Democratic Party’s new president, who will succeed Suga.
All four candidates in the LDP race plan to compile a stimulus package to keep supporting the pandemic-hit economy.
Japan, whose fiscal health has long been the worst among major developed countries, has a goal of turning its primary balance — tax revenue minus expenses other than debt-servicing costs — into the black by fiscal 2025. But the report said the “immediate task” is to bring the economy back to a path of growth.
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