Japan’s hidden resources for economic growth
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quantity. TOKYO: Japan’s population is declining, deflation has returned and the nation’s economy is still stuck in a cycle of weak, stop-start growth. And yet, there are a number of hidden and underutilised resources that Japan could tap to try and escape this economic malaise.
The Organisation for Economic Cooperation and Development (OECD) notes that while demographics are against it, Japan still has a huge wealth of human capital, thanks to its highly trained and educated people. There’s also dormant capital and even unused inventions that could be put to work to increase growth.
Japan was the world-leader in number of patents issued in 2014, according to the World Intellectual Property Organisation, with almost 300,000 patents. The United States was second with almost 260,000. However, for all that inventiveness, Japanese companies were much less aggressive with innovative new products and businesses.
“However, there are risks in commercialising these innovations, and Japanese culture doesn’t allow people to come back from mistakes,” said Yumiko Murakami, head of the OECD’s office, here. “We need to create an environment where risk-taking is attractive.”
Meanwhile, Japan’s women are some of the most highly educated in the world, and yet many leave the workforce to have children and then don’t return, or return to part-time, lower-paying jobs.
Although there has been some improvement in this trend in recent years, there is still a big gap with men and with women in other developed nations. Their absence from the workforce during their 30s and 40s, which are the prime working years, hurts their chances of advancement, reduces life-time incomes, and wastes the time and money spent on their education.
It’s similar for older Japanese, whose labour force participation declines markedly once they hit 60 years old, which is the mandatory retirement age in many companies. Japanese are some of the longestliving people in the world and they have higher literacy and numeracy skills than the average for developed nations. For them to leave the workforce early, or officially retire and then come back at lower pay, hurts their potential lifetime income and also overall growth.”
“We have to reform the structure of the economy, and improve the system,” said Murakami.
Boosting the nation’s lagging productivity is another way the government and companies could generate more output despite the shrinking population.
The amount of unused money socked away at companies and banks is a huge untapped resource for the nation.
Households held 920 trillion yen (RM37.46 trillion) of their assets in cash or deposits at the end of June, the second-highest level on record, and corporate cash and deposits stood at 242 trillion yen, an all-time high.
If Japan was to utilise these resources, it could “dramatically transform” the nation, said Murakami. The biggest problem facing the nation is how to reform the economy’s structure to use these hidden and ignored treasures. Those reforms would hurt, he said, but if that pain was postponed, then the nation would die. Bloomberg