Comment on Masaki Kuwahara A Search for Potential Female Labor Forces in Japan s Aging Society Challenges for Prime Minister Yukio Hatoyama Masahiro Kawai, ADBI Macroeconomy Research Conference Beyond the Financial Crisis: Strategies for Righting Global Imbalances and Restoring Asia s Economic Growth Tokyo Club Foundation for Global Studies Tokyo, 17 November 2009
Outline 1. Challenges for Prime Minister Yukio Hatoyama - Landslide Victory of DPJ - The Japanese Economy in Long-term Decline - New Policy Directions of DPJ - East Asian Community 2. Masaki Kuwahara, A Search for Potential Female Labor Forces in Japan s Aging Society - Female labor participation and TFR 3. Conclusion
1. Economic Challenges for Prime Minister Yukio Hatoyama
(1) Landslide Victory of DPJ Inability of LDP to govern in a consistent way - too many prime ministers giving up power and responsibility - shift from Koizumi reform to its denial Inability of LDP to respond to the society s diverse needs Rising sense of economic insecurity among the public
(2) The Japanese Economy in Long-term Decline Long-term Economic Stagnation Childless, Aging Society Rising Public Debt
Japan: Long-term growth decline 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0-1 -2-3 -4-5 -6 1960's: 10.5% 1970's: 5.2% 1980's: 4.4% Real GDP Growth Rate (1960-2009) 1990's: 1.5% 2000's: 0.8% 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Japan s per capita GDP: Decline to 17 th among OECD members Per capita GDP (PPP dollars) 35,000 30,000 25,000 20,000 15,000 10,000 5,000 5 7 9 11 13 15 17 19 Ranking among OECD Members 0 1990 1995 2000 2005 21
China s GDP will exceed Japan s in 2010 9 8 7 GDP of Japan and China (Trillion US dollars) 6 5 Japan 4 3 2 1 China 0 1990 1995 2000 2005 2010 Source: IMF, World Economic Outlook Database, October 2009
Women are bearing only 1.3 children 6.0 5.5 5.0 4.5 4.0 India 3.5 3.0 2.5 2.0 France China US 1.5 1.0 1960-1965 1965-1970 Germany 1970-1975 1975-1980 1980-1985 1985-1990 1990-1995 1995-2000 2000-2005 2005-2010 Japan 2010-2015 2015-2020
Japan s public debt is one of the largest among OECD members 180 160 140 Financial Liability of General Government (% of GDP, 2008 ) 120 100 80 60 40 20 0-20 -40 Japan Italy OECD Average France US Germany Canada UK Sweden Deanmark Korea Australia Gross Liability Net Liability Source: Economic Outlook No. 85 Annex Tables - Table of Contents (OECD)
(3) New Policy Directions of DPJ From concrete to people Climate change East Asian Community
Consumption stimulus through social sector protection Current policies Reallocating part of the supplementary budget away from public work spending towards households Direct or indirect transfers to households for supporting children and education
Policy challenges Growth strategy needed - deregulation of nontradables sectors (medical, health, education, etc), agriculture - knowledge sector, such as the green industry with IT support - new trade policy Increase household income Increase propensity to consume fundamental reforms of the SSP system
Climate change policy A 25% reduction of CO 2 emission relative to 1990 Cap and trade, carbon tax New green industry Policy challenges: Japan s CO 2 emission per GDP is already very low How to convince the industry that this policy is good for Japan
Two types of external demand External demand from the US and Europe - Japan (and other Asian economies) excessively dependent on the US & Europe - This market continues to be important given Japanese firms competitiveness in high-tech, high-quality products But this market will remain stagnant External demand from dynamic emerging Asia Mass markets in growing China, India, ASEAN(middle-class: currently 880 million people, expected to expand)
(4) East Asian Community Japan should regard Asia as a whole as Japan s market (for its products, technology, skills) and benefit from this East Asia-wide Economic Partnership Agreement - ASEAN+3 or +6 EPA by forming a China- Japan-Korea EPA & building on ASEAN+1 FTAs - Japan needs to open its markets for agriculture and skilled labor (particularly for old-age caretaking) Asian infrastructure connectivity Asian green new deal Monetary and financial cooperation - From Chiang Mai Initiative to an AMF - Exchange rate policy coordination (ACU)
East Asia s Evolving Economic Architecture ASEM APEC European Union (27 member countries) Pakistan Mongolia Myanmar Lao PDR Cambodia ASEAN Philippines Thailand Malaysia Singapore Brunei Darussalam Indonesia Vietnam EAS ASEAN+3 Japan China Korea Australia New Zealand United States Canada Mexico Peru Chile Taipei,China Hong Kong Papua New Guinea Russia India
2. Masaki Kuwahara A Search for Potential Female Labor Forces in Japan s Aging Society
Focus on female labor participation and the total fertility rate Focus of the paper How to encourage female labor participation The paper takes a look at various data and attempt to explain the relationship between female labor participation and TFR A logical explanation is that higher female labor participation discourages marriage, resulting in lower fertility But the recent data show a positive correlation between female labor participation and TFR a good trend but puzzling
An implicit model: Women s rational choice of labor force participation, marriage, and child bearing/raising under the specific institutional and cultural setting Women s initial choice: whether to enter the labor market or not (what is an alternative?) Impediments to female labor participation: household services - ordinary HH work (cooking, cleaning, laundry) - childcare services - old-age care Rising demand for childcare services despite a decline in child population Limited availability of childcare facilities
3 issues Policies to encourage women to work and bear/raise children - transfer payments to families with children? - provision of more childcare facilities Temporary drop-out from the labor market - making it easier to return to the original job Old-age care - women s work? - old-age care facilities - role of foreign migrant workers (from Philippines, Indonesia, etc)
3.Conclusion The new DPJ government under Prime Minister Yukio Hatoyama will be different: - Socially more inclusive - More environmentally friendly - More open to Asia But there are big challenges ahead: - How to reverse the long-term trend of economic decline: need for a growth strategy - How to create vitality, responding to the childless, aging society - How to restore fiscal sustainability Economic partnership with Asia will be key, while maintaining security alliance with US