2000 should be remembered as the first year in which it was statistically confirmed that microeconomic activities can significantly affect macroeconomic performance, according to Naoki Tanaka, president of the 21st Century Public Policy Initiative.

Tokyo’s consumer price index for 2000, released in late December, fell 1 percent from the previous year, highlighting a substantial decline in the “clothing and footwear” and “food” categories.

These falls have been attributed to the aggressive pricing strategies of hamburger chain MacDonald’s and Uniqlo, the highly popular discount clothing chain, Tanaka said at the symposium in Tokyo.

“When somebody moves forward, others follow suit,” Tanaka said, explaining why other retailers and fast-food chains rushed to lower prices to compete with the two.

Tanaka also attributed the drop in service prices to communication expenses caused by the aggressive business strategies taken by cellphone companies to lure customers.

“So far, we have discussed prices in terms of the macroeconomic framework — policy steps taken by the Bank of Japan or the government,” he said.

But the price declines in these categories were not caused by the BOJ or other government actions, he said. They resulted from the business strategies of a handful of innovative companies. “It was demonstrated that microlevel corporate activities can change the macroeconomic framework.”

Tanaka predicted that the same thing could happen this year with companies’ return on equity, a reaction that he said could drastically alter consumer sentiment.

Innovative behavior on the part of individual companies will no doubt boost their ROE, he said. If Japanese corporations were to increase their ROE to 10 percent, for example, and if the public is ready to put some 600 trillion yen – roughly half of the 1.3 quadrillion yen in household-sector assets – into stocks and investment trusts, the resulting 60 trillion yen in investment gains would surely boost consumer spending.

So far, Japanese corporate managers have been intent on avoiding risk by staying with the herd, Tanaka said. After all, shareholders can’t complain if one company is doing the same thing as another in the same industrial sector.

But this is finally changing, and innovative firms are taking efforts to improve their ROE, he said. “What is important is to encourage innovative corporations to emerge, which will naturally affect the behavior of others,” he said.

While there will be dropouts as competition intensifies, people will come to understand that job opportunities created by the innovators will offset jobs lost at less-innovative firms, he said.

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