Japanese Politics in PromotingEconomic Development

Changing Patterns over Time

Policy Design and Formulation in Developing Countries

Three Historical Cases1. Meiji Japan’s Transition – Flexible with many leaders

When feudal Japan was forced open by the West, facing the risk of

colonization, it had to define new national goals and decide how to achieve

them and who would do it. Political reform, industrialization and military

buildup were pursued under a flexible form of politics.

2. MITI’s industrial policy (late 1950s to 1960s) – Bottom-up

The national goal was clear—recover from war damage and catch up with the

West. MITI was given sufficient mandate and policy tools to achieve this.

MITI took initiative in formulating various strategies; networking with

private businesses, related ministries and LDP politicians; generating national

consensus and preparing the draft law.

3. Abe Shinzo and Abenomics (2013-now) – Top-down

PM Abe has taken away policy authority from bureaucrats, creates policies

by himself (with his advisors), and uses appointing authority of high officials

to subjugate ministries. Abenomics informs budget requests which are

favored. Officials are fearful of PM and PM advisors. Sontaku (pleasing the

boss by reading his mind and bending rules) has led to political scandals.

Second Arrival of the West and End of Bakufu

US Commodore Perry and his “Black Ships” entered Edo Bay and used military threat to open up Japan (1853-54), resulting in Treaties of Amity with the US and with European powers (1854).

Trade with the West began under “unequal” commercial treaties of 1858, in which Japan had no tariff right or right to judge foreign criminals. Trade brought significant social and economic changes.

Fights over pro- vs. anti-foreigners, and pro- vs. anti-Bakufu began, eventually toppling Bakufu in 1867-68 and establishing the Meiji government which pursued open trade and technology import.

M.C. Perry (1794-1858)

Black Ships

Odaiba No.3 (Bakufu’s fortified island)

Support

Bakufu

(佐幕)

Support

Emperor

(尊王)

Anti-

foreigner

(攘夷) Satsuma Han

Choshu Han

Open door

(開国)Meiji Gov’t

1862

1865

1866

X

French support British support

Initial Shock, Transition, Implementation

1853 to 1858 Western shock and panic

– Feudal Japan governed by samurai was pried open by the threat of the

Black Ships (American battleships).

– Japan was forced to sign unequal commercial treaties with the West (no

tariff right, no right to judge foreign criminals).

1858 to 1881 Transition Period (deciding what to do)

– Little change in players or political pattern (only the Tokugawa Family

drops out).

– National goals and roadmaps are debated, contested and decided.

1880s to 1890s Implementation Period (executing the plan)

– Meiji Constitution under strong emperor (1889), first election and

parliament (1890), fierce budget debate starts in parliament

– “Company booms” (late 1880s-); industrial revolution (1890s).

– Japan overtakes UK in cotton product export (early 20c).

– Militarily, Japan wins over China (1894-95) and Russia (1904-05).

Flexible Structure of Meiji Politics(Banno & Ohno Hypothesis, 2010)

Three dimensions of flexibility: 1858-1881

(1) Evolution of goals

– Late Edo: 2 goals of Fukoku Kyohei (rich & strong han)& Kogi Yoron (feudal assembly)

– Early Meiji: 4 goals of Fukoku (industrialization), Kyohei (foreign campaign), Constitution and Parliament

(2) Flexibility in coalition building

– Groups continued to form and re-form as situations changed. No group monopolized power for long.

(3) Flexibility of leaders and leading groups

– Policy priority of each leader evolved and solidified over time.

– Leading group was able to embrace multiple goals and adjust policy

Meiji politics was fundamentally different from East Asia’s Post-WW2 developmental dictatorship (Korea, Taiwan…) which featured one strong long-serving leader, political rigidity, pursuit of economic growth at the cost of democracy, and so on.

Han as the Critical Unit and Incubator for

Producing Meiji Leaders and Policy Coalitions

Han is the administrative domain given to daimyos to rule in

exchange for loyalty to the Tokugawa family. There were

about 300 hans at the end of the Edo period (mid 19c).

In successful hans, daimyo (han lord) and samurais worked

closely for reform and influence (especially Satsuma).

Under daimyo’s direction, han samurais worked to:

- Absorb new knowledge, contact foreigners and acquire

negotiation skills

- Cooperate with other hans & bakufu officials for political reform

- Engage in foreign trade to strengthen han’s

budget and purchase Western weapons

©NHK 2018

Mito

Meiji revolution was driven by

samurais in dynamic hans in

Western Japan. These hans had

1/ Trade profits

2/ Imported military systems

& technology

3/ Negotiating & networking

skills with Bakufu, other hans

& foreigners

During end Edo and early

Meiji, the same political

mechanism operated with

basically the same leaders,

who were many (except

Tokugawa family).

Yamagata

Ito

Kido

Itagaki Sakamoto

Goto

SaigoOkuboGodaiMatsukata

Okuma

Kuroda

Political leaders and elites (mid 19th century)- Leaders and elites analyzed or mentioned in Banno & Ohno (2010)

- Samurai class dominates (95%)

han lord (daimyo, 5) han samurai (45) bakufu samurai (2)

noblemen (2) merchant (1)

Name Years Area of achievement

1 Nakane Sekko 1807-1877 Political scientist

2 Shimazu Nariakira 1809-1858 Han lord

3 Yokoi Shonan 1809-1869 Confucianist, statesman

4 Sakuma Shozan 1811-1864 Militarist, jurist, confucianist

5 Nabeshima Naomasa 1814-1871 Han lord

6 Uchida Masakaze 1815-1893 Bureucrat

7 Yoshida Toyo 1816-1862 Statesman

8 Shimazu Hisamitsu 1817-1887 Han top leader

9 Okubo Tadahiro 1817-1888 Bakufu official, statesman

10 Hasebe Jimbei 1818-1873 Bureaucrat

11 Date Munenari 1818-1892 Han lord, statesman

12 Nagai Uta 1819-1863 Advocate for open door policy

13 Murata Ujihisa 1821-1899 Statesman

14 Katsu Kaishu 1823-1899 Bakufu militarist, statesman

15 Iwakura Tomomi 1825-1883 Statesman

16 Yamauchi Yodo 1827-1872 Han lord

17 Saigo Takamori 1827-1877 Statesman (1 of 3 Ishin Heroes)

18 Iwashita Michihira 1827-1900 Statesman

19 Saisho Atsushi 1827-1910 Bureaucrat

20 Ijichi Masaharu 1828-1886 Militarist

21 Matsudaira Shungaku 1828-1890 Han lord

22 Yoshii Tomozane 1828-1891 Bureaucrat

23 Soejima Taneomi 1828-1905 Statesman

24 Yuri Kosei 1829-1909 Statesman, businessman

25 Takechi Hampeita 1829-1865 Statesman

26 Yoshida Shoin 1830-1859 Thinker, teacher

27 Okubo Toshimichi 1830-1878 Statesman (1 of 3 Ishin Heroes)

28 Oki Takato 1832-1892 Statesman

Name Years Area of achievement

29 Kaieda Nobuyoshi 1832-1902 Statesman

30 Kido Takayoshi 1833-1877 Statesman (1 of 3 Ishin Heroes)

31 Mori Kyosuke 1834- ? Bureaucrat, statesman

32 Eto Shimpei 1834-1874 Statesman

33 Iwasaki Yataro 1834-1885 Founder of Mitsubishi Zaibatsu

34 Fukuzawa Yukichi 1834-1901 Philosopher, founder of Keio Univ.

35 Sakamoto Ryoma 1835-1867 Freelance patriot

36 Komatsu Tatewaki 1835-1870 Statesman

37 Godai Tomoatsu 1835-1885 Business leader in Kansai area

38 Inoue Kaoru 1835-1915 Statesman, businessman

39 Fukuoka Takachika 1835-1919 Statesman

40 Matsukata Masayoshi 1835-1924 Statesman

41 Kawamura Sumiyoshi 1836-1904 Navy militarist, statesman

42 Sanjo Sanetomi 1837-1891 Statesman

43 Tani Tateki 1837-1911 Army militarist, statesman

44 Itagaki Taisuke 1837-1919 Military leader, statesman

45 Kabayama Sukenori 1837-1922 Navy militarist, statesman

46 Nakaoka Shintaro 1838-1867 Freelance patriot

47 Goto Shojiro 1838-1897 Statesman

48 Okuma Shigenobu 1838-1922 Statesman, founder of Waseda Univ.

49 Yamagata Aritomo 1838-1922 Statesman, army militarist

50 Komuro Shinobu 1839-1898 Statesman, businessman

51 Kuroda Kiyotaka 1840-1900 Statesman

52 Ito Hirobumi 1841-1909 Statasman

53 Mutsu Munemitsu 1844-1897 Statesman, diplomat

54 Furusawa Uruu 1847-1911 Statesman, bureaucrat

55 Yano Fumio 1850-1931 Statesman, literary man

Evolution of National Goals over Time

Kogi Yoron (公議輿論 government by public deliberation)

Deliberation

among 4 or 5

wise daimyos

Feudal

assembly by

303 hans and

bakufu

Upper House

by daimyos &

Lower House

by lower

samurais

Western style

Constitution

VS

Western style

Parliament

British style

multiple party

democracy

VS

German style

constitutional

monarchy

Fukoku Kyohei (富国強兵 enrich country, strengthen military)

Each han:

Trading house

(Export traditional

products for profit)

Import weapons

(Buy cannons, guns,

battleships from West)

Edo Meiji

- Mercantilism

- Bargaining

power against

other hans and

Bakufu

Edo Meiji

State-led industrialization

with Western machines and

technology (Okubo)

VS

Military expedition to rest

of Asia (unhappy samurais)

-Developmentali

sm

-Budget conflict

between 2 goals

Flexibility in Coalition Building

Industrialization

Constitution

Parliament

Foreign

expeditionOkubo (Satsuma)

1830-1878

Kido (Choshu)

1833-1877

Saigo (Satsuma)

1827-1877

Itagaki (Tosa)

1837-1919

Fukoku Kyohei

(rich country, strong military)

Kogi Yoron

(democratization)

Source: Banno (2007), edited by presenter.

Naichi Yusen

(internal reforms first)

Seikanron

(Korean expedition plan)

C

I

P

C

I

Kido

Okubo

Iwakura

Mission

1871-73

Saigo

Itagaki

I

C

P

Split

I I

Korean

Campaign

Proposal

1873

Osaka

Conference

1875

Rise of

Industria

lizer 1876

Budget

crisis

1880

M

C

I

Saigo

Rebellion

1877

P

Okubo

assassinated

OkumaRadical

Conservative

Ousting of

Okuma 1881

Itagaki

Outside Gov’t

Ito, Inoue

State

enterprises!

Privatization!Kuroda

Factions-- C: constitution P: parliament I: industrialization M: military

Meiji

begins

1868

YamagataM

Flexible Politics: How Various Factions Joined and Separated

Features of flexible coalition forming No single group dominated; each had to form coalition with 1 or 2

other groups to pursue policy.

As situations changed, coalitions were re-formed every few years. No

coalition lasted for very long.

Trust and goodwill existed among leaders up to final confrontation

(Saigo’s rebellion, ousting of Okuma, Itagaki’s attack on government).

Despite rivalry and friction, political flexibility permitted

attainment of multiple goals in the long run without

extreme swings or mutual destruction.

Comparison of Influential Hans

• Saga (Hizen) leaders (Okuma, Eto, Oki, Soejima)—they lacked han-based training for coalition building; could not participate in the flexible politics of early Meiji.

• Fukui (Echizen) leaders—split sharply between fukoku kyohei (Nakane, Yuri) vs. austerity (Shungaku); could not build military capability and left out in Meiji Revolution.

Ability to pursue

multiple goals

Coalition building

capability

Stability and

flexibility of leaders

Satsuma High High High

Choshu Low Moderate High

Tosa Moderate High Moderate

Saga Low Low Moderate

Fukui Moderate High Low

Source: Banno & Ohno (2009).

Note: “Stability and flexibility of leaders” means the ability of the same leader group to manage internal disputes and

embrace new policies as circumstances changed, rather than creating extreme policy swings between two split groups.

Winning Hans and Losing Hans

All hans experienced internal disputes between Sonno Joi (respect

emperor, expel foreigners) and Kaikoku (open country and trade).

The keys to success were (i) how quickly to adopt Kaikoku policy; and

(ii) strong teamwork of han leader and samurais for promoting Fukoku

Kyohei (enrich han, strengthen military).

Satsuma

Choshu

Tosa

Saga

Fukui

1858 18671862

Commercial

treaties signed End of Bakufu

18651861

18651862

Problem: no cooperation with other hans

Dominant Policy of Each Han over TimeBrown: Sonno Joi, Green: Kaikoku

1863 1866

Perfect teamwork after 1862

New leaders emerged

Too late

Alliance 1866

Alliance 1867

Policy shift embraced

MITI’s Industrial Policy, late 1950s-60s

The Ministry of International Trade and Industry (MITI) was created in 1949 by merging three bodies. In 2001, it was renamed to the Ministry of Economy, Trade and Industry (METI).

Foreign scholars depicted MITI as the command post of Japanese industries (Johnson 1982, Okimoto 1991). MITI officials often deny this view; MITI was only supplementing the market mechanism.

Econometrics and case studies do not produce a conclusive answer. In the car industry, for example, removal of tariff protection was carried out in steps combined with successful promotion of component suppliers. However, MITI’s attempt to merge Japanese carmakers to cope with American giants was rejected by producers.

Many of industrial measures were not unique to Japan—tax privileges, subsidies, low-interest policy loans, support for technology import and R&D, small business promotion, regulating entry and investment, infrastructure, industrial zones, regional planning, etc. But MITI implemented them more effectively than other countries.

1960s:

Income Doubling Plan

Japan in the 1950s was highly politicized. The nation was split between pro-US capitalism and pro-labor socialism. Confrontation culminated in 1960 with the Miike Coal Mine Strike and the Renewal of the Japan-US Security Treaty. In both, the capitalist side won.

PM Ikeda Hayato (in office 1960-1964) turned to economics as a new national focus. He proposed to double people’s income within ten years.

Shimomura Osamu, economic advisor to PM Ikeda, offered theoretical arguments for the Income Doubling Plan.

The Ministry of Finance (MOF), the Ministry of International Trade and Industry (MITI) and the Economic Planning Agency (EPA) were key organizations to execute this plan. Receiving general policy mandate from the top, they could propose and execute details.

In reality, per capita real income rose 2.44 times between 1960 and 1970 (average annual increase of 9.3%). The plan was over-achieved.

Shimomura Osamu Ikeda Hayato

MITI: Key Features and Instruments MITI targeted specific sectors. It had many formal and informal

channels to talk to the private sector, and collected vital information for designing and implementing policies. MITI was neither captured by special interests nor detached from industrial reality (arms’ length; Embodied Autonomy). MITI and firms “picked the winner” together.

Deliberation councils were a popular decision making mechanism at central and local governments as well as ministries. MITI used, and still uses, deliberation councils actively to draft policies inviting businesses, academia, media, consumers and NPOs.

The Small and Medium Enterprise (SME) Agency, created in 1948 under MITI, offers many programs including management, finance, accounting, tax, marketing, location- and sector-specific support, consultation and inquiry. SME support is also available from many regional and specialized agencies. Shindan (診断 enterprise diagnostics and advice) is provided to SMEs by MITI-certified experts. Kosetsushi(公設試) is set up in every prefecture to provide technical support.

Special laws for enhancing machine and electronic part suppliers were enacted in 1956 and 1957 and extended with good results.

MITI

Main Bureaus Attached Organizationsand External Bureaus

Deliberation Councils

Minister’s Secretariat (incl. Research & Statistics)

Int’l Trade Policy Bureau

Int’l Trade Admin. Bureau

Industrial Policy Bureau

Industrial Location & Environment Protection Bureau

Basic Industries Bureau

Machinery & Information IndustriesBureau

Consumer Goods Industries Bureau

Agency of National Resources

＆Energy

Patent Office

SME Enterprise Agency

Agency of Industrial Science

& Technology

Trade & Investment Training

Other

Industrial Structure Int’l Trade TransactionExport Insurance Industrial Location & WaterTextile Product Safety & Household Goods Quality IndicationPetroleum Aircraft & Machinery IndustryElectrical Works Traditional Crafts Industry......... ..........

Minister

Politically appointed VM

Administrative VM

Deputy VMs

Special assistants

Source: adapted from Okimoto (1989), p.117.

Organization Chart

MITI junior staffstudy group

Hearings:Learned individualsInterested partiesOverseas employeesLocal representativesOthers

MITI research group(subcommittee)

Deliberation council

Conduct survey,compile data

Public relations:PublicationsExplanatory meetingsLecturesOthers

Briefings, subcommittee reports

Prepare draft

Final report

Feedback

Outside lecturers

Source: Ono (1992).

MITI’s Policy Making Was Bottom-up

Young officials in their 30s actively gathered information and interacted with businesses, thus having substantive influence on final result—unlike in most other countries where young officials only take orders from above and do what was assigned.

Industrial Policy in JapanSummarized from Prof. Akira Suehiro’s 2006 lecture

Japan’s industrial policy helped to develop the market rather than distort it.

The Fiscal Investment and Loan Program (FILP) mobilized a huge pool

of official funds outside annual budget (postal saving deposits, pension

contributions, etc.) to industrial and infrastructure development. The

Japan Development Bank (JDB) and Exim Bank dispensed such fund.

JDB and Exim Bank loans were relatively small, but they had a

signaling effect and catalyzed private commercial bank loans.

JDB loans for business investment were combined with management

support of JDB and technical support of MITI. Rejected firms were

allowed to apply many times. JDB and MITI coached them until they

succeeded (“return match game”).

MITI’s deliberation councils formulated policies for targeted sectors

and strategic issues. Junior officials drafted plans which were discussed

within MITI, across ministries, by businesses and other stakeholders.

Figure 4 Mechanism of FLI and

the Role of MITI and JDB

Policy Making

Policy

Implementation

Fiscal Finance

technology advice managerial advice

Source: Drafted by Akira Suehiro

Individual Firmsapplied to fiscal finance

Industrial Council on SpecificIndustry or Target

Government Officers,Academicians,

Specialists

Business Associationsfor each industry

Japan DevelopmentBank

Department of HeavyIndustry

Ministry of InternationalTrade and Industry

(MITI)

Ministry of Finance(MOF)

Fiscal Fund Bureau

Source: Prof. Suehiro’s 2006 lecture in Vietnam.

Deterioration of Politics: 2006-2012

Between Koizumi and Abe2, there were 6 prime ministers in 6 years.

LDP (Abe1, Fukuda, Aso: 2006-09) was unpopular leading to the change of government to DPJ in August 2009.

DPJ (Hatoyama, Kan, Noda: 2009-2012) proved even worse than LDP; they practiced random policies and amateur politics. DPJ’s response to the Fukushima nuclear disaster was ineffectual.

Some hoped for a transition from “1955 Regime” (LDP’s political dominance) to two-party competition, but this was not realized due to DPJ’s incompetence.

In his second term from December 2012, Abe re-emerged as a powerful and very active PM both domestically and internationally.

Liberal Democratic Party

(LDP) 1955-2009, 2012-(except 1993-96)

Democratic Party of

Japan (DPJ) 2009-2012Koizumi

2001-2006 LDP Abe No.2 2012-

Second Government of Abe Shinzo

The First Abe Cabinet (Sep.2006-Sep.2007) was unsuccessful partly due to his illness.

The Second Abe Cabinet (Dec.2012-) has the following features:

• Active, quick, and vigorous (compared with past PMs).

• PM Office initiates policies and appoints high ministerial officials, thereby subjugating all ministries as implementing agencies.

• Politically conservative, pursuing business interests, nationalism and active defense stance.

• Trying to broaden and amend Article 9 of the Constitution.

• Diplomatically active—top salesman for Japanese businesses, coping with China, North Korea and Trump, etc. (final impact unknown)

His Liberal Democratic Party (LDP), in coalition with the KomeitoParty, has an absolute majority in both houses. Oppositions are too weak and fragmented. PM Abe can pass any law after nominally debating it. Oppositions can delay it only for a few days.

But his super dominance has produced political scandals—bureaucrats trying to please Abe by bending rules (Moritomo, Kake Incident).

Dominance of LDP-Komei CoalitionRuling party coalition has majority in both Houses due to weak and fragmented opposition parties (which often merge, split and change names); LDP-Komei can force any law after debating it formally and superficially in the parliament.

The term of The House of Representatives is four years; last election took place in Oct. 2017.

The term of The House of Councillors is six years with half elected every three years; last election took place in July 2016.

Lower House (465)

LDP

61.1%

Komei

6.2%

CPJ

11.8%

Hope

10.8%Communist

2.6%

Upper House (242)

LDP

50.0%

Komei

10.3%

DPJ

20.2%

Communist

5.8%

Osaka Ishin

5.0%

PM Abe’s Domestic Policy Initiatives

Abenomics (revitalizing the Japanese economy)

Mobilizing women in labor market

Reversing Shoshika (producing fewer children)

Revitalizing rural economies

Supporting SMEs (including investment abroad)

Supporting irregular and part-time workers to achieve higher income, better working conditions and transition to regular workers

Work-life balance—less overtime, elimination of karoshi (death or suicide due to overwork)

Importing more foreign labor to overcome labor shortage

However, many of these policies were drafted hastily without deep consultation with key stakeholders. Implementation is haphazard and ineffective.

Three Arrows of Abenomics

1. Aggressive monetary policy (“New Dimension”)

- PM Abe appointed BOJ Governor Kuroda Haruhiko (Mar. 2013)

- Dispel deflation mindset—inflation target of 2 percent within 2 years

- Monetary easing with new asset purchases (REIT, etc.), doubling monetary base and BOJ’s government bond holding within 2 years

- Correction of high yen (done)

2. Flexible (active) fiscal policy

- Revive economy first, consolidate budget later

- Increase infrastructure investment

3. New growth strategy (cabinet decision in June 2013; after this, a new cabinet decision is issued every June to expand or revise the strategy)

- Japanese Economy Revitalization Headquarters formed; under it, Industrial Competitiveness Conference

- Three roadmaps and three plans (12 pillars, 37 items, 56 sub-items) proposed in 2013; revisions and additions every subsequent year.

On June 14, 2013, Prime Minister Abe issued a message

upon the formulation of “Japan Revitalization Strategy.”

Source: Japan Revitalization Headquarters, PM Office, June 2013.

Abenomics after Five Years Abe’s strategy seems to have been, first secure a good economic recovery

(which everyone would welcome), achieve high approval, then push through

his conservative agenda related to national defense and constitutional reform.

Abenomics renewed fiscal and monetary stimuli, together with growth

strategies, to end deflation mindset. These were Three Arrows of Abenomics

which were presented in flashy slogans but, in essence, they were not so

different from policies adopted by past administrations.

Aggressive monetary policy initially succeeded in lifting business and

consumer psychology, boosting the stock market and lowering the yen. But

these short-term effects did not lead to long-term growth. The 2% inflation

target was declared by the Bank of Japan in 2013 but was not achieved.

Large fiscal stimuli and active public investment were pursued. A rise in

corporate income tax receipt temporarily supported fiscal activism. Fiscal

consolidation and public debt reduction were put on the back burner.

The growth strategy was regarded as the most crucial yet the weakest Arrow

of Abenomics. Many measures were introduced under catchy phrases every

year but meaningful results were few despite the government’s claim to the

contrary.

Two-percent Inflation Target to Be Missed

A large jump observed from 2014 to 2015 was generated artificially by an increase of the general consumption tax from 5 to 8 percent in April 2014. If this effect is removed, consumer inflation continued to remain well below 2 percent during the entire Abenomics years. While BOJ is obsessed with attaining 2-percent inflation, recent price movement hovers near zero. BOJ blames this on globally weak energy prices. However, there is doubt over the desirability of achieving inflation through a weak yen and/or high imported prices—or even inflation targeting itself.

Consumer Price Inflation (change over previous year)

Source: Ministry of Finance Statistics page

(downloaded on May 18, 2018).

BOJ’s initial timeline for

achieving 2% inflation

was “within 2 years.”

This deadline was

postponed six times, then

finally abandoned in

May 2018.

Budget Improves as Revenues Rise In recent years, strong profits pushed up corporate income tax receipt—partly

thanks to the initial impact of Abenomics.

Consumption tax was raised from 5% to 8% (April 2014). The proposed

subsequent increase to 10% was delayed twice for political (election)

considerations but is expected to be implemented in 2019.

Trillion yen

General

budget

expenditure

General

revenue

Gov. bond

issue

- Construction

bonds

- Deficit bonds

20182000 201019901980

The Growth Arrow of AbenomicsExpanding and Revising Every Year without Achieving Results?

Under Abenomics, it became customary for the Cabinet to approve a new growth

package every June with catchy phrases. However, it is difficult to produce real-

sector results quickly. Targets seem too many and too random without proper

execution or monitoring. The annually revised Growth Arrow can be regarded as

a shifting wish list or a guideline for ministries to receive additional budget

allocation.

In 2014, the “New” Growth Strategy proposed “Recovering an earning

power,” “Producing workforce,” “Reform rock-solid regulations,” “Energy”

and “Tourism.” Abenomics was declared to be in an implementation stage.

In 2015, “Revised Japan Revitalization Strategy 2015” was publicized, and

“Abenomics Stage 2” was declared. The new phrases included “Productivity

revolution through investment for future,” “Local Abenomics” and “Reform

2020: PPP projects for growth.” Small businesses and rural areas, which were

left behind so far, were now targeted.

The Growth Arrow (cont.)

In 2016, the slogan, “100 Million Total Success” was launched. Nominal

GDP was to targeted to increase from 500 to 600 trillion yen by FY2021. The

following items were added to the Growth Arrow: Fourth Industrial

Revolution, higher birth rate, keeping jobs while taking care of old parents,

promoting inbound FDI and Japan Brand, and new market creation for Tokyo

Olympics 2020.

In 2017, “Future Investment Strategy 2017: Reforms toward Society 5.0” was

adopted. Its pillars included healthy longevity, mobility revolution, next

generation of supply chains and FinTech.

In 2018, five pillars are added: (i) Human Power Revolution, (ii) Productivity

Revolution, (iii) working style reform, (iv) receiving new foreign labor, and

(v) economic & fiscal policy with postponement of budget consolidation.

By this time, public attention to Abenomics seems to have waned, and criticism

for not producing actual results instead of just new phrases is mounting. Some

(many?) regard Abenomics as total or partial failure.

Labor shortage in Japan is severe and structural. It will get worse in the future.

Japan has long refused to import foreign labor (except skilled professionals),

but now it must change this policy to alleviate the labor shortage problem.

Ginno Jisshusei (technical interns) and foreign students (incl. Japanese

language students) working part-time within hour limits are the main sources

of foreign labor. There are also illegal foreign workers.

Ginno Jisshusei aims at technology transfer by improving the skills of young

foreign workers in Japan for three years before going home. But it is often

viewed as a source of cheap unskilled labor. This system, when poorly

managed, increases crime, worker disappearance, unpaid wage or overtime,

illegal work assignment and other human rights violations.

In 2017, the government revised this system to deal with these problems and

also to receive a greater number of Jisshusei. Additional liberalization is now

planned to bring more foreign workers to Japan.

Instead of adjusting existing systems in minor ways, Japan needs to reconsider

its immigration policy more fundamentally to cope with its long-term labor

problems. This should include, among other things, how to welcome and

integrate foreigners as part of the extended Japanese society.

Importing Foreign Labor

出所、国際協力研修機構（JITCO）業務統計各年。Source: Japan International Training Cooperation Organization, Annual Operations Report.

Foreign Technical Interns and Students in Japan

出所、日本学生支援機構（JASSO）「外国人留学生在籍状況調査結果」各年。Source: Japan Student Services Organization, Annual Report on Foreign Students Studying in Japan.

Ginno Jisshusei(Technical Interns)

Foreign StudentsX 1000 X 1000

Thailand

IndonesiaPhilippines

Vietnam

China

Other

China

Korea

Nepal

Vietnam

Other

Taiwan

Abe Changes Ginno

Jisshusei Policy (2017-)Coping with emerging problems

A new organization （Ginno Jisshu Organization）shall approve

training plans and monitor the performance of Supervisory

Organizations and receiving firms in Japan.

Importing more foreign labor

(for organizations and firms with good record)

The training period in Japan is extended from three to five years.

Maximum foreign labor share at a company is expanded from 5% to

10% of regular workforce.

Eligible sectors are expanded: agriculture, fishery, construction, food

processing, textile and garment, metal and machinery, elderly care,

etc. These can be further added or revised over time.

Government is considering further liberalization to receive more foreign

workers (additional five-year stay, right to bring family, etc.)