Update On Japan's Economic Stimulus

• Progress Report On Japan’s Economic Stimulus

• By Scott Benjamin

Dr. Vernon Beck, the former president of the Japan Society of Fairfield County, said the Asian country’s economy has improved since Prime Minister Shinzo Abe took office in December 2012 but that the last of the three arrows has had mixed results.

A July 1 Washington Post editorial praised the first two arrows – fiscal stimulus and monetary expansion – for producing “modest but real progress” in Japan.

However, the editorial added that the progress won’t be sustained unless the third arrow – structural reform – is successful in not only “ending two decades of stagnation, but also raising the economy’s long-term growth potential.”

Japan, which has just 127 million people, compared to China, which is the world leader with 1.3 billion, ranks third in gross domestic product, behind the United States and the Chinese. It also boasts a 99 percent literacy rate and is recognized for making the best cars in the world, according to Lou Auletta Sr., the former honorary counsel general to Japan from Connecticut.

However, Greg Boyko of Canton, the honorary counsel general to Japan from Connecticut, has said Japan, which in the 1980’s appeared poised to surpass the United States in economic output, has had a stagnant economy since the early 1990s.

Mr. Abe, who is in his second tenure, as prime minister, returned to office in December 2012 and immediately embarked on an ambitious stimulus package.

The prime minister, who was elected to his first tenure in 2006, has been trying to revitalize a country that has struggled for years to overcome a housing bubble.

Dr. Beck said the fiscal stimulus and monetary expansion has boosted the economy out of deflation to where the inflation rate is at 1.25 percent as it moves to reach the optimum of 2 percent. The package also has increased the value of the Japanese Yen.

However, he is less confident about the structural reforms that comprise the third arrow.

“There are some positive things, but it is hard to say that it has been completely successful,” Dr. Beck said in a July 16, 2014 phone interview.

The Ridgefield resident said the lowering of corporate tax rates from 35 percent to the high 20s has made Japan more competitive.

The Washington Post editorial stated it had ranked 28th out of 31 highest-income countries in the ease of doing business.

Dr. Beck lauded the effort to bring more foreign-born workers into the country to provide child-care and allow more women into a work force that is overall declining with an aging population.

However, he said many of those foreign workers will only be in the country for a short time since Japan remains resistant to the large-scale multi-racial immigration that has been a fixture in the United States for decades.

Dr. Beck, who formerly worked for IBM, said Japan still lacks the potent stock market and corporate rules that are common in other developed economies.

He said, for example, that little progress has been made in reforming the country’s inefficient agricultural sector, which is largely based around small farms.

Dr. Beck said the completion of the proposed Trans-Pacific Partnership free trade agreement would probably stimulate more structural reform in agriculture and other sectors of Japan’s economy as a result of foreign competition.

The proposal encompasses Japan, the United States, Canada, Mexico and eight other countries, but has been stymied by the U.S. Congress.

U.S. Rep. Elizabeth Esty (D-5) of Cheshire told a section of PS 104: World Governments, Economies And Cultures at Western Connecticut State University Apr. 17, 2014 that U.S. Senate Majority Leader Harry Reid (D-Nev.) has said no action would be taken this year on that trade agreement as well as the proposed pact between the United State and the European Union.

President Barack Obama has lobbied for both agreements since being elected to a second term in 2012.

“The United States also has a dysfunctional government,” Dr. Beck said in an apparent comparison with Japan, which has elected seven prime ministers since Junichiro Koizumi, who Mr. Boyko has called a transformative leader, left office in 2006.

Although, each of the last three American presidents have been elected to a second term, the U.S. Congress has been criticized in recent years for being unable to reform entitlement spending and revise immigration laws in addition to the lack of progress on free trade.

“I think we should encourage trade as much as possible,” Dr. Beck said when asked about the Trans-Pacific Partnership. “It opens new markets and consumers benefit.”

On another topic, he said the Japanese have made considerable progress in recovering from the March 2011 earthquake and that the reconstruction will probably continue for at least another seven years.

Wikipedia.org has reported that there 15,887 people were killed in the earthquake, which turned some towns into rubble.