(Bungeishunju: December 2015 – p. 94–103)
By Prime Minister Shinzo Abe
Overview of the first stage of Abenomics
In a press conference held on Sept. 24 after the Liberal Democratic Party’s general meeting of members of both chambers of parliament in which I reported my reelection as the LDP President, I declared, “Abenomics will move to the second stage.”
After the LDP returned to power, my priority was “to pull the country out of deflation.” In order to achieve that goal, I introduced the “three arrows” of Abenomics. The following results have been achieved in the first stage of Abenomics: the excessive appreciation of the yen in which 80 yen or less equaled one dollar has been corrected; the Nikkei average has more than doubled from 8,000 yen; and jobs have been created for more than one million people as indicated by an effective ratio of job vacancies to job applicants of 1.09, exceeding 1.0 for the first time in seven years and achieving the highest figure in 23 years. Japan’s economy has almost climbed out of deflation.
In 2012 during the Noda administration under the Democratic Party of Japan (DPJ), the DPJ, the LDP, and Komeito agreed to increase the consumption tax to 8% in April 2014 and 10% in October 2015, which was later written into law. But I decided to postpone the second increase and dissolved the House of Representatives at the end of last year. My decision was based on the preliminary figure for GDP from July to September last year, which indicated more than a 2% drop in consumer spending compared with the same period in the previous year. The first increase in the consumption tax to 8% in April was obviously a factor. If I had increased it again to 10%, I would have lost the chance of a lifetime to pull the country out of deflation. Therefore, I made the decision to seek the judgment of the entire nation.
Unless an economic crisis like the Lehman shock occurs, I will definitely increase the consumption tax to 10% in April 2017. At the same time, we will introduce a reduced tax rate on which we are currently deliberating. It is essential by then to boost Japan’s economy by all means. “The three new arrows” for the second stage of Abenomics are a way to achieve that.
Backbone of the three new arrows
The first new arrow is “promotion of economic growth,” the second is “child rearing assistance to push up the low birth rate,” and the third is “social security measures to increase nursing facilities for the elderly.”
Over last two years and ten months, I have promoted investment in Japan in various foreign countries. But I always hear people saying: “The birthrate is declining and the population is aging in Japan. No matter what reforms are implemented, Japan will not be able to stop the population decline. Therefore, sustainable economic growth and investment returns cannot be expected.” I realized that unless Japan makes vigorous efforts to deal with the issue of declining birth rate and aging population, we will not be able to draw sustainable investment from overseas.
In that case, what should we do? The first step is to halt the declining birth rate and aging population. We will aim to maintain a population of 100 million in 50 years. If the current birth rate (about 1.4%) continues, Japan’s population will be about 80 million in 50 years. In addition, 40% of the total population will be over 65 years old, which is “a superannuated society.” The population will be 40 million in 100 years, one-third of the current population, which will directly lead to a decline in the nation’s power.
Simply maintaining 100 million is not our goal. The administration is responsible for developing a social system in which each of the 100 million people can play active roles in society. For example, we plan to create “a society where women shine.” That is one of the most important tasks I have been working on since taking office.
However, I will not try to make “all 100 million people middle class” in terms of the economy. What I will try to achieve is a society where the young, the old, women, men, people with intractable diseases, people with disabilities, and people who have failed can play active roles. In order to create such a society, I will remove any restrictions that may get in the way. That is how I came up with the idea of a “society where all citizens can be actively engaged.”
In order to realize such a society, I launched “the new three arrows.” The first arrow is “promotion of economic growth” to enhance my economic policy under the previous three arrows. This arrow will aim to achieve “GDP of 600 trillion yen” by 2020. Japan’s highest GDP since World War II was 523 trillion yen marked in 1997.
We recently reached a broad agreement on the Trans-Pacific Partnership (TPP). As a result, 99.9% of tariffs on industrial products to be exported in the region (for 11 countries except Japan, about 19 trillion yen in total) will be removed. This will expand opportunities for Japanese corporations.
We will attract investment from a wider economic region by taking advantage of the TPP. We will push forward with the productivity revolution and initiate innovation. We will increase employment, raise salaries, and expand domestic demand. Local potential will flourish, and women and elderly people will have more opportunities. Deregulation will be implemented. If we mobilize every possible policy, 3% of nominal economic growth rate per year is completely feasible. If we continue to achieve that rate every year, “GDP of 600 trillion yen” will be on the horizon by 2020.
The second arrow is “child rearing assistance to push up the low birth rate.” We will try to realize a “desired birthrate of 1.8” by the middle of 2020. The “desired birthrate” is the rate when the hopes of all women wishing to give birth are fulfilled. A survey conducted in 2010 showed that the desired birthrate was 1.8. However, the current birthrate is 1.4. By removing any circumstances that prevent women from giving birth, we will try to make the actual birthrate the same as the desired birth rate.
The third arrow is “social security measures to increase nursing facilities for the elderly.” We will aim to achieve “zero employment separation on account of elderly care.” According to a survey by the Ministry of Internal Affairs and Communications, over 100,000 people a year leave their jobs to provide elderly care. Symptomatic treatment is insufficient to solve the issue of nursing care. In order to extend the healthy life expectancy, we will implement medical reform that focuses on preventive medicine. We will also encourage companies to invest in healthcare.
The key phrase behind all the policies I have explained is “society where all citizens can be actively engaged.” In order to realize this, I newly established a new post of “minister for promoting dynamic engagement of all citizens” in the latest Cabinet reshuffle. Instead of being in charge of an existing ministry, the new minister is required to work on removing compartmentalized bureaucracy among ministries and agencies. The new minister is also required to accurately hit the bull’s-eye on the three targets. I appointed Katsunobu Kato as the new minister. He has served as a deputy chief cabinet secretary for last two years and nine months.
The Abe administration will speedily proceed with the second stage of Abenomics. There will be G20 summit in Turkey in the middle of November, followed by the APEC summit in the Philippines and the East Asia Summit in Malaysia. Next year, Japan will host the Ise-Shima summit. I want to demonstrate to the international community Japan’s firm presence backed by a strong economy. (Summary)