2022 Online Davos Forum| Japanese Prime Minister Kishida Fumio advocates "new capitalism" will be committed to "economic and social change"

On January 18, local time, Japanese Prime Minister Kishida Fumio attended the 2022 World Economic Forum video conference and delivered a speech on topics such as responding to the epidemic, economic recovery, climate change and industrialization structural reform.

The current world epidemic is still raging, and the global recovery is still fragile and unbalanced. Kishida highlighted a series of challenges facing Japan, including the lack of medium- and long-term investment, the widening gap between urban and rural areas, the decline in the number of middle classes, and the intensification of social inequities.

In his speech, Kishida repeatedly emphasized the word "reform". "We need to deal with historic challenges and problems, and we pushed out the concept of 'new capitalism', which is to decide not to leave everything to the market, not to rely entirely on competition. We need to work together to carry out reforms to promote social and economic development across the board. Kishida said.

In introducing the government's specific measures, Kishida also said that the next step is to deal with climate change, develop a green economy, digital transformation and strengthen economic security as the "engine of development".

Sun Lijian, director of the Financial Research Center of Fudan University, said in an interview with the 21st Century Business Herald: "In the underlying technology of digital technology, Japan has an advantage. Today, Japan is vigorously developing digital industries to reflect the concept of 'Industry 4.0'. In addition, renewable energy-related industries, such as new energy vehicles and new low-carbon building materials, are also Japan's strengths. Therefore, Kishida Fumio clearly wants to use these two major tracks to reconstruct the recovery of the Japanese economy. As for whether the implementation of Kishida's policy can be effective, Sun Lijian believes that the key lies in whether Japan can make good use of its past advantages and maintain cooperative relations with the Chinese market.

The "new capitalism" will be dedicated to reform and distribution

Since taking office, Kishida has made it a slogan to build a "new capitalism" and promised to work on a "virtuous circle of growth and distribution." At the World Economic Forum, he also elaborated on the significance of "new capitalism" in promoting economic change under the impact of the epidemic.

"The epidemic has made us aware of many problems, especially now that the domestic economy is only in a state of 'half full', so we have to carry out reforms." After reviewing the "neoliberalism" that the world had advocated in the past, Kishida proposed the concept of reform through "new capitalism" and said that in the process of promoting economic development, good distribution should be carried out, and the specific measures were to promote salary increases and increase "investment in people".

According to the OECD, Japan's wage growth lags far behind that of the world's major economies, with average wages barely growing over the past three decades. In the past three years, the downward trend in wage growth has intensified. Kishida Fumio once expressed his opinion in an article published in a Japanese magazine, "Increasing wages is not a 'cost', but an 'investment' in the future, which is an important part of human capital investment." ”

In his speech, Kishida more clearly explained the need to increase human investment, saying that on the basis of strengthening human investment, more investment and capital can be absorbed, forming a virtuous circle, which is conducive to digital transformation.

"The widening gap between rich and poor is a common problem faced by countries around the world. While Japan still advocates narrowing the income distribution gap despite the already low Gini coefficient, It can be said that Kishida's new type of capitalism captures the essence of the problem. Cui Cheng, a researcher at the Macroeconomic Research Institute of the National Development and Reform Commission and the former first secretary of the Chinese Embassy in Japan, told 21st Century Business Herald that this proposition emphasizes narrowing the gap between the rich and the poor and promoting the two-wheel drive of economic growth, which is undoubtedly correct from this point of view.

Judging from the current situation in Japan, Kishida's proposal to "increase wages" is largely aimed at preventing the recurrence of domestic deflation.

On January 18, the Bank of Japan announced that it would maintain its short-term interest rate target of -0.1% unchanged and promised to keep long-term interest rates around zero. At the same time, the Bank of Japan also announced an adjustment to its inflation forecast, raising its inflation forecast for the current fiscal year from 0.9% to 1.1% starting in April. This is the first time since 2014 that the Bank of Japan has changed its view of inflation risks. Central Bank Governor Toshihiko Kuroda also said Japan would continue to maintain an accommodative policy until inflation stabilized above 2 percent.

At present, Japan is facing upward pressure on energy and food prices, and inflation is frequent. Despite this, Sun Lijian told reporters that "this inflation does not stem from economic overheating, but because the contradictions in the upstream supply chain are transmitted to the downstream." In addition, according to the performance of the four consecutive months of year-on-year decline in household consumption in November 2021, Japan's domestic consumption has not seen retaliatory growth.

Sun Lijian believes that in the absence of a complete recovery in Domestic Consumption, the Japanese government will depreciate the yen even more. "A depreciation of the yen can enhance Japan's competitiveness in exports." He told the 21st Century Business Herald reporter that the current depreciation of the yen is precisely the performance of the market's expectation of Japan's continued loose monetary policy, which will be good for the Japanese economy.

At present, Japan has stabilized its export share through loose policies. Since domestic consumption accounts for more than 50% of Japan's total GDP, for Kishida Fumio, the goal of economic recovery can only be achieved by boosting domestic consumption at the same time. In this light, it is particularly important to achieve the goal of a virtuous circle of growth and distribution.

Cui Cheng, however, expressed concern about the effectiveness of the "new capitalism" policy. "Constrained by factors such as domestic large business groups and the liberal democratic party's internal factional politics, the extent of policy implementation remains to be seen." In addition, in the face of inherent problems such as low birthrate and aging, even if the policy implementation effect is better, it may not have obvious effects. ”

Emphasis on green economy and digital transformation

Under the epidemic, there has been a crisis in the global supply chain. Faced with such risks, Kishida also said at the January 18 forum that it is necessary to enhance the independence and autonomy of Japan's economic strategy.

In this regard, Sun Lijian said that this is not difficult to understand, "Japan has a high degree of external dependence, and it does not have a strong internal circulation market like China." In addition, the problem of aging and low birthrate has also affected Japan's consumption and domestic demand. ”

Faced with the current imbalance in the economic structure, the Kishida government also said: "To overcome the areas known as the weaknesses of the Japanese economy, we will focus on guiding the people to face challenges and investment." At the forum, Kishida Highlighted Digital Transformation.

"The epidemic has made us realize that our domestic construction in terms of digitalization is backward." Kishida admits that Japan faces many challenges in this field. In terms of strengthening digital construction, he proposed some specific measures, such as increasing the popularization of optical fiber and 5G, 5G to achieve 90% coverage within two years, in addition to gradually implementing telemedicine, online education, smart agriculture and autonomous driving.

For the transformation of the digital economy, Kishida Fumio has many prospects. Sun Lijian told reporters that Japan's digital transformation highlights the concept of "Industry 4.0", indicating that Japan will enter the era of intelligence. "'Industry 4.0' is an inclusive track that can bring changes to people's lives, reduce the burden and cost of living, and at the same time bring us many convenient opportunities and channels for fragmented innovation." Sun Lijian told reporters that Japan's development of digitalization is very similar to China.com.

"Because of the platform economy and the support of the Internet, today's low-income groups in China also have the ability to consume." Low-income groups do not only have their own living space when they enter the employment of large enterprises, under the influence of the platform economy, they can start a business through this inclusive model. Sun Lijian analyzed to reporters that Japan just saw the benefits of this model economy. On the other hand, he believes that Japan has certain advantages in the field of digital technology and can empower its manufacturing industry with the capabilities of digital technology.

In addition, Kishida Fumio also highlighted the "green economy". At present, climate change is a common challenge facing the whole world. Talking about carbon reduction and emission reduction, Kishida said that he hopes to build an Asian community to deal with climate change. At the meeting, he also mentioned Japan's emission reduction targets, saying that "Japan will reduce carbon emissions by 47% by 2030 and achieve 'carbon neutrality' by 2050." ”

"Today, China's low-carbon strategy gives Japan a huge opportunity on the supply side." Sun Lijian told reporters that if Japan can seize the market opportunity of China's construction of a green ecology, then the export structure in Japan will increase the category of "renewable energy", such as low-carbon building materials, which are its advantages and will also help the recovery of the Japanese economy.

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