A fiscal 2012 white book on the economy and state finances endorsed by the Cabinet on July 27 stressed the importance of entrepreneurship to accelerate innovation, an important factor for economic growth as Japan faces a declining birthrate and the graying of the population.

Unfortunately, the white book fails to provide concrete policy tools designed to encourage entrepreneurship. To do so, the government should work out a wide range of policies that not only provide economic incentives but also change the direction of education.

The white book stressed the need to carry out innovation in every aspect of society in order to increase productivity. But it pointed out that, in Japan, entrepreneurs are not highly valued and that people who plan to start a new business lack the required knowledge.

Noting that Japanese do not have a strong motivation to start new businesses, it said that in 2011, among people aged 18 to 64, only 5.2 percent started a new business in Japan compared with the 12.3 percent in the United States.

The government should remember that to be innovative, an entrepreneur needs not only deep knowledge about their prospective business, but also a keen understanding of the historical and cultural context in which his or her business is placed.

Without knowledge of history, culture and social structure and organization, a business person will not be able to correctly gauge people’s needs and find effective ways to turn their ideas and innovations into a meaningful social force.

The government will need to promote education to enhance knowledge of history, culture, politics, sociology and even philosophy as well as technology. It will also have to provide a strong social safety net and a helpful loan program so that people can try a new business without worries.

The white book expressed fear that the shrinking labor force will hamper sustainable economic growth. In this connection, it pointed out that in Japan, female participation in economic activities was relatively low among the member nations of the Organization for Economic Cooperation and Development.

It called for efforts by the business community to enable women in their 30s and 40s to retain employment even after giving birth to children. This point has been raised many times. It is high time that both the government and businesses set down clear goals to ensure continued employment for women.

The annual report called for putting restraints on social welfare benefits and increasing tax revenues. Although waste in social welfare must be eliminated, the government must realize that the reduction of social welfare benefits will lead people to save more money, thus leading to a contraction of the economy. Tax increases are also a factor that can prolong deflation.

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