INTERNATIONAL JAPAN G8
Japan provides foreign aid for many countries around the world , but it seems to be little awareness of this . Could you give a few examples of Japanese foreign aid projects that have produced meaningful economic benefits ? Also , how do you think foreign aid should be provided in the future ?
Japan has been providing Official Development Assistance ( ODA ) for six decades , since 1954 .
Japan has been providing Official Development Assistance ( ODA ) for six decades , since 1954 . Initially , this began with the provision of technical assistance as part of the compensation that Japan was obliged to pay in the aftermath of the Second World War . In February 2015 , the government announced a new framework called the Development Cooperation Charter . In the future , as the Asia region is expected to see rapid economic development , Japan has been providing a variety of types of aid with the aim of fostering high-quality growth . The Japanese Government has been collaborating with the Asian Development Bank ( ADB ), making it possible to increase the available budget for projects such as the expansion of the Delhi Metro in India , building of elevated expressways in Ulaanbaatar ( the capital of Mongolia ), and building of the Nhat Tan Bridge in Vietnam by 30 % over five years ; of the total budget of 13 trillion Japanese Yen , approximately 110 billion US dollars is being provided as aid from Japan . I believe that Japan will be seeking to provide aid for dealing with infrastructure , poverty , infectious diseases , armed conflict and education in the future .
Japan plays a major role in the provision of Foreign Direct Investment ( FDI ) around the world , contributing approximately 114 billion US dollars in FDI in 2014 . What would you say are particularly “ Japanese ” characteristics of Japan ’ s FDI ?
With Japan ’ s balance of trade worsening , I think Japan ’ s basic stance toward investing overseas is that it needs to increase the financial return on such investment . Japanese firms have been undertaking a considerable amount of mergers and acquisitions ( M & A ) activity .
Due to the trend toward low fertility and the aging of the population , the Japanese domestic market is starting to shrink . This means that it is more than just a case of developing overseas markets when it comes to FDI ; it is important to produce locally for local consumption . With Japan ’ s balance of trade worsening , I think Japan ’ s basic stance toward investing overseas is that it needs to increase the financial return on such investment . Japanese firms have been undertaking a considerable amount of mergers and acquisitions ( M & A ) activity . Japanese company Canon , for instance , recently acquired a Swedish camera manufacturer . Japan ’ s strength here is that a company forms a dedicated team , and undertakes extensive communication with the acquisition target before investing . Then , once the acquisition is completed , the acquiring Japanese firm sends out its best employees to work at the acquired company , so that the acquiring company can continue to grow and improve following the acquisition . I feel that this is a distinctive approach that is more or less unique to Japan .
The Japanese economy is often evaluated by other countries , which claim that it has failed to achieve vigorous economic growth while Japan enjoys a reasonable degree of economic stability . What would you say are the particular strengths of the Japanese approach to financial policy ?
I think it ’ s probably misleading to suggest that Japan ’ s financial policies are in any way superior to other countries . After all , Japan ’ s national and local government authorities combined have total debts of around 1,000 trillion Japanese Yen . That is equivalent to twice Japan ’ s GDP , which is the highest level of any country in the world . One reason why Japan has been able to get away with this is that these debts are held within Japan itself , not overseas ; also , the government has been able to use the Consumption Tax to make good what would otherwise have been a significant shortfall in revenue . The Consumption Tax will be increased to 10 % in 2017 ; what the government really needs to do is to make a serious effort to tackle the problem while the Consumption Tax rate still seems relatively low by comparison with the situation in Europe . Many Japanese citizens have been calling on the government to utilize its tax revenues more effectively . Since citizens have been saying that this is important , the government has been setting new financial objectives and working to improve governmental efficiency , so as to be able to do something along these lines . The main reason for Japan ’ s fiscal deficit is large borrowings to cover social welfare expenditure . In 1990 , government expenditure totaled 43 trillion yen . Social insurance expenditure includes pensions , healthcare , and long-term care provision . By 2015 , mainly because of increased social insurance expenditure , total government spending had risen to 116 trillion yen . This means that the government now needs to cover roughly 50 trillion yen in additional expenditure through the use of public funds , borrowings and taxation . As a result , Japan ’ s national tax burden rate now stands at 38.5 %, compared to 30 % for the US , and 60 % for France . Although 38.5 % is still relatively low when compared to many other countries , public confidence in the government has been negatively affected . It is felt that the government “ only listens to certain groups within society , and is wasting money as a result .” There is a general feeling that a lot of government expenditure mainly benefits vested interests , and any attempt to change the status quo is likely to provoke loud complaints from these vested interests because this does seem to be the case to some extent . However , I think that it is politicians ’ job to listen to those people who normally cannot make their voices heard . Until now , as the government has generally tended to take the side of the private sector , it has allocated sizeable budgets where they were asked for . Recently , there is a reaction against this , and people are being told that they need to do with less . At the same time , the feeling that the government has no choice but to disassociate itself from vested interests is going to have a serious impact on two different levels . Overall , I feel that it is better if the government avoids involvement in those areas where it does not need to be involved .
Japan is world-renowned for its technological capabilities . However , it has been heard that doing business tends to impede commercialization of this technology because the communication skills , decisiveness and speed are not high . At the macro level , this situation is probably having a negative impact on the Japanese economy . What sort of measures do you think need taking to overcome this problem ?
I feel that even more pressing issue is the decline in Japanese people ’ s to “ goget attitude ” and ability to think for themselves . The impact of smartphones , television , etc . has exacerbated this problem .
The cultivation of “ global talent ” who can communicate effectively in English is of course very important . It induces attractiveness that courses are taught in English at universities such as Akita University and International Christian University ( ICU ). In addition , cross-
JAPAN AND THE WORLD MAGAZINE OCTOBER 2015 // 54