The Sunday Leader

Japan: Relax Immigration Policy To Grow

A continued relaxation of Japan’s immigration policy could be considered as a means of addressing its declining workforce.
This was said by International Monetary Fund’s First Deputy Managing Director David Lipton, delivering a speech on the topic “Japan’s Growth Challenge-Special Case or Herald for the Future,” at Washington, D.C. on Wednesday (September 26).
He said that Japan’s declining population places a premium on raising women’s labour force participation which is among the lowest in advanced economies.
Here, an expansion of child and elder care services including through deregulation as well as better incentives to work through income tax reform would help.
Following are further edited excerpts of Lipton’s speech: “With policymakers around the world discussing ways to revive a sputtering global economy, a seminar on how to raise growth in Japan is a deserving topic.
Japan has struggled for the better half of the last two decades to boost economic activity.  After years of real growth rates of 4% and above, growth slumped in the 1990s during Japan’s lost decade and since then never reached the previous high levels.
This year marks a special point in Japan’s quest to raise growth for two reasons: First, a swift recovery from the earthquake is important to revive business and consumer confidence which was badly shaken.
On this account Japan has done well.  Growth is expected to exceed 2%, although indicators point to a weakening in the second half of this year as a result of the global slowdown.
But more importantly, higher long-term growth has become an essential part of the success of Japan’s fiscal reforms.
These took an important step forward this summer with new legislation to double the consumption tax rate to 10% by 2015. Higher trend growth will be key to bring down Japan’s high public debt ratio.
So, what sort of structural reforms can Japan implement to raise growth? In recent reports we have laid out a number of potentially fruitful avenues: Japan can also benefit from increasingly integrating into the fast-growing
Asia region. Many businesses have succeeded in growing through their engagement overseas-examples are new auto facilities in Indonesia and expanded financial services throughout Asia. But more can be done. In particular, participation in the Trans Pacific Partnership or economic partnership agreements would further strengthen ties within Asia and raise both inward and outward FDI.
Finally, the Japanese financial system, while sound, could do more to support growth. Venture capital and other financing for start-ups lag badly, while less dynamic SMEs receive guaranteed loans.
A public policy reorientation is needed to ensure that more risk capital is available for new and innovative businesses.
These are just some examples of how growth could be raised in Japan.
But today’s discussion has also an important global dimension, Japan is no longer an outlier. Its growth challenge mirrors that of many other developed countries:
Fiscal policy room has been exhausted, policy rates are near zero and the effects of population ageing are becoming more tangible, especially in Europe. Generating a robust recovery in this environment has become a shared challenge.
Governments in many developed countries are pressed to find the right balance between reining in large fiscal deficits to reassure markets and supporting growth. At the same time, monetary policy’s effectiveness has been blunted at the zero-interest bound.  And efforts to reform labour markets and protected sectors have to be mindful of their effects on income inequality.
These common challenges raise a broader set of questions, which today’s panel should discuss. First, what can countries in a low–interest low-growth environment do to raise growth?  What is the right macroeconomic policy mix if both fiscal and monetary policyare constrained? What can be said about policy sequencing and is there a common structural reform agenda, especially for aging economies?
Another set of questions relates to distributional concerns. The income gap between the current young and old is rising. How should countries deal with an increase in intergenerational inequity?
What can countries do to keep the youth productive and motivated, even though they have to bear the brunt of coming fiscal adjustment?
Finally, how well do we understand the economic implications of ageing? Growth models tell us not to worry about changes in the labour force as per capita income can still go up.
But there may be other important changes, in particular, is Japan’s struggle with deflation a special case or is it part of its demographic transition and what does the latest research tell us about ageing’s effects on growth and inflation?
In less than three weeks global leaders will convene in Japan as Tokyo hosts this year’s IMF and World Bank Annual meetings.
The meeting will be the first such gathering in Japan in almost four decades and will provide an opportunity to see first-hand how Japan has fared after the global crisis and last year’s devastating earthquake.”

1 Comment for “Japan: Relax Immigration Policy To Grow”

  1. As if I care

    No wonder the second largest group of single women in London is none other than Japanese women and I have always wondered why they have to stick in London even with a lower income yet smartly dressed.
    They don’t need to be nuns they are very pretty.

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