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Wednesday, Aug. 3, 2011
Economic white paper
The fiscal 2011 government white paper on the economy and state finances, issued July 22, analyzes economic conditions in the wake of the March 11 disasters. It calls for the creation of an economy resilient to crises and makes some policy proposals; however, the proposals are too general in the context of the post-disaster economy.
According to the white paper, Japan's potential gross domestic product (GDP), with the effect of price movements excluded, decreased by about ¥6 trillion in the first quarter of 2011 from the last quarter of 2011 — a drop of nearly 1 percent in real GDP. The drop was mainly due to the damage to economic supply chains and the power shortage caused by the Fukushima nuclear crisis.
The white paper notes that the March 11 disasters' impact on the economy is much larger than was the impact of the Great Hanshin earthquake (1995), or of Hurricane Katrina (2005) on the U.S. economy. It also states that a mood of self-restraint and the nuclear fiasco have put a damper on consumer spending.
Touching on state finances, the white paper says that in the balance sheet of the central and local governments, debts in excess of assets amounted to ¥518 trillion at the end of fiscal 2009 if public money used to pay for pension benefits is included.
It calls for a two-prong policy of pushing reconstruction efforts forward while at the same time making efforts to restore the health of state finances.
The white paper points out that many OECD countries have achieved economic growth through simultaneous spending cuts and revenue increases, the latter including tax increases. But one wonders whether this scenario can be applied to the Japanese economy, which has been severely impacted by the triple disasters.
The white paper stresses the importance of the introduction of new technologies, investment in human resources and deregulation as a means of attaining middle- and long-range economic growth. It also calls for Japan's wider participation in free-trade agreements.
But what Japan needs now is concrete policy measures that will have immediate positive effects as the nation strives to recover from the triple disasters. The government should take immediate, concrete actions in this direction.