The economy has been showing some signs of recovery lately, thanks to the success of Abenomics. At the year’s outset, many business executives predicted 1.5 to 2.2 percent growth. However, fears persist that the national economy may not achieve such positive results in the face of a number of unsettled structural problems, such as the decline and aging of the population, a fragile financial structure and stagnant regulatory reform. In fact, as the calendar turned the page to 2016, the Bank of Japan had to introduce a new monetary measure. Considering this development, one cannot help but worry about weakness in the nation’s growth potential.
Toward the end of last year, Prime Minister Shinzo Abe came out with his “new three arrows” of Abenomics. The plan, aimed at promoting “dynamic engagement of all citizens,” envisages achieving nominal gross domestic product of ¥600 trillion in 2020, realizing a birthrate of 1.8 and making sure no people have to quit their job to care for their relatives. Some related budgetary measures have already been prepared.
But in view of the progress of the population decline and aging, as well as the stagnation of financial, social insurance, regulatory and education reform, a decline in economy’s growth potential appears unavoidable. In the early 1990s, Japan represented 16 percent of the world’s GDP, but its share had dropped to 7 percent by 2013. The OECD estimates that the share will come down to 3 percent in 2060.
What I am most concerned with about the economy is the decline of Japan’s innovative power. J.A. Schumpeter advanced the doctrine of “creative destruction” and defined it as the “new combination” of means of production, resources and labor in economic activities in ways different from conventional ones. In Japan, people generally tend to understand this “innovation” process merely as “technological innovation.” But what he meant is to reform the total system of creating economic value, such as institutions, organizations, management, operation and technology.
In Japan, however, not only is the management power of businesses weak, but politics are drifting toward populism and the government has a passive attitude. In a measure of technological innovation, which is essential for economic development, 19 Japanese won Nobel Prizes for natural sciences. But this number is far smaller than the 253 for the United States and 73 for Britain. In both academic and industrial circles, the drive for technological development is stagnant and the number of patent applications and that of published technical papers here remain at lower levels than in not only the U.S. but also China.
If Japanese markets are to shrink due to the population declining and aging, there will be no path available except to promote globalization of its economic activities and enhance its innovation power. If the current generation fails to make the effort necessary to overcome these problems, the people of the next generation will be forced to tread the path of decline.
What kind of society should Japan aim to create in the future? I consider it necessary for this country to base itself on globalism, aspire to qualitative economic enhancement rather than quantitative expansion, ensure social stability and order, enrich innovation power, promote cultural charms and create conditions that win the trust of the international community. As for economic indicators, the country should strive to attain a top-class position in terms of per capita GDP.
When the Great East Japan Earthquake disasters hit, people around the world praised the attitude of self-help and mutual assistance shown by people in the Tohoku region. In Japanese society, people possess a sense of value characterized by mutual reliance, tolerance toward other cultures, sincere efforts to elevate themselves and to master the secrets of anything, respect for the worth of nature and the enrichment of beauty and sensibility in their coexistence with nature. This is what I call “Japanability.” If this ability is polished, it will surely help accelerate the nation’s globalization and innovation.
Allow me to bring up the path of the world’s past social development. Humans historically developed agrarian society by using farming tools and livestock, started the industrial revolution by inventing the steam engine, and created the industrial society of mass production and mass consumption by expanding the use of oil. Then they built the advanced information society by inventing the computer and ushered in advanced financial society by combining the computer with financing technology. But this process invited the Lehmann shock and the Euro crisis. We humans are now struggling to find a new development model.
I believe the consolidation of human values will serve well as a major development model in the future. People across the globe now want the advent of a society in which human worth and rights are respected, life is sound, health is maintained, medical care is sufficient, social order is firmly maintained, culture is highly developed and creative activities are constantly in motion. In other words, they want a society in which conditions conducive to active innovation are prepared through the promotion of human values.
So Japanability will surely serve as a driving force to build a society of the kind people around the world long for in the 21st century. Of course there exist some weak points in Japanese society, such as the lockstep mentality, poor communication power, avoidance of logical thinking and weak system thinking. If these inferior social factors are remedied and original, positive traits are promoted, Japan will surely be able to offer a social development model based on the elevation of human values.
Japanability means a source of energy that effectively gives full play to the tradition and order of Japanese society and creates new values. Needless to say, it is human power that is at the center of the driving force for starting and continuing the process to create a new society. In this sense, what Japan should give priority to is education reform.
Shinji Fukukawa, a former vice minister in the Ministry of International Trade and Industry (now the Ministry of Economy, Trade and Industry) and president of Dentsu Research Institute, is a senior adviser to the Global Industrial and Social Progress Research Institute.
IN FIVE EASY PIECES WITH TAKE 5