JIN-366 -- Pearls of Wisdom From an Economic Guru

J@pan Inc Magazine Presents:

T H E J @ P A N I N C N E W S L E T T E R

Commentary on the Week's Business, Technology and Cultural News
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Issue No. 366
Tuesday April 25, 2006 TOKYO

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CONTENTS

@@ VIEWPOINT: Pearls of Wisdom From an Economic Guru

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@@ VIEWPOINT: Pearls of Wisdom From an Economic Guru

Earlier this month the "Nikkei Shimbun" ran a series of interviews with
economic　gurus under the title "Burnishing Japan." Being the Nikkei, the
"Wall Street Journal" of Japan, the editors tossed softball questions, and
the　replies were rah rah free market. Let's listen in on the interview
with Ryutaro　Komiya, a 77-year-old economist and professor emeritus
at Tokyo University
and Aoyama Gakuin.

WHAT SORT OF COUNTRY SHOULD JAPAN AIM TO BECOME?

In the past Japanese leaders often spoke of becoming one of the "powers,"
with　emphasis on military strength. Today Japan, which largely depends
on the US　for its security, would have difficulty becoming a power in
international politics.　Japan should aim to become a country where
people are affluent and healthy　and can live in safety--a country from
which many others seek to learn.

IS JAPAN THAT SORT OF COUNTRY TODAY?

"Since the Second World War Japan has achieved wonderful results in real
income,　education level, life span, and social safety. Efforts must be
made to preserve these
achievements."

-- Fair enough. But the prof is silent on questions of endemic homelessness and
prejudicial attitudes to minorities, the latter often rendered invisible by the
widely held　myth in Japanese homogeneity. As for education, Japan ranks about
the same as　North Korea in English-language ability.

WHAT SHOULD BE THE GOALS OF SOCIOECONOMIC SOCIETY?

"To steadily improve the welfare of each Japanese. I'm not speaking of income only.
It's important to also improve such things as the environment, public safety,
healthcare,　and social security. Some people are opposed to growth now that
we've come this

far. They are mistaken. Even if there are constraints on resources and the
environment,　man is a creature that continuously contrives various improvements
in the present　situation. To people who oppose growth in Japan, the richest of
countries, I would　like to ask, 'Would you be willing to have one half of your
salary distributed to people
in poor countries?' "

--This is rhetorical legerdemain. Improvement does not necessarily equate
with growth.

SOME OBSERVERS CLAIM MARKET FORCES HAVE BECOME TOO POWERFUL.

"Western Europe, North America, and Japan have achieved great success on
the basis of a free market and private enterprise. Markets require regulations.
The　US has the strictest regulations. If there is a trustworthy system other
than a　free market with rules, I would like critics to inform me of it.
Economic systems　outside of this framework are clearly failures."

A GROWING CHORUS OF OBSERVERS ARE CLAIMING A WIDENING GAP　IN INCOME BETWEEN
RICH AND POOR

"The definition and method of calculation of 'gap' are imprecise. Japan
has a more　equitable distribution of income than America and other countries.
It is difficult to　prove income is becoming less equally distributed in the
medium- or long-term."

-- The government should have figures from which can be extrapolated
interpretations　proving or refuting this notion. The fact that the Japanese
perceive income inequality　to be growing suggests this is a phenomenon of
the present.

SO YOU THINK A SOCIETY WHERE THE FRUITS OF ONE'S EFFORTS ARE
EVALUATED ECONOMICALLY IS DESIRABLE?

"The disparity in salary between the lowest paid professor and a Nobel laureate in
US universities probably exceeds a factor of 10. Many Japanese academics, amongst
whom there is no income disparity, apply themselves to work outside of the
university.　Egalitarianism fosters such a situation."

HOW WOULD YOU RATE THE KOIZUMI REFORMS?

"The privatization of the Japan Highway Public Corporation and the postal service
has　begun at long last. Margaret Thatcher's drastic reforms greatly improved
the British　economy. Tony Blair of the Labor Party has continued most of the
reforms."

-- Say again....

WHAT IS THE SIGNIFICANCE OF AIMING FOR A SMALL GOVERNMENT?

" 'Bureaucratic-industrial complex' is more accurate than 'government.' The real
problems　are collusive bidding on contracts at the initiative of government
agencies and the　reassignment of ex-government officials to positions in
private of semi-government　organizations. Now that Japan has entered an era
of shrinking population, the　'government' does not have the wherewithal to
shoulder unnecessary things."

CAN JAPAN REMAIN AN AFFLUENT SOCIETY EVEN AS ITS POPULATION SHRINKS?

"If the total fertility rate falls below 1.3, the population will decline
too rapidly. Even　if ways are contrived for seniors and women to work, at
the present speed, people　presently employed will not be able to support
an affluent society.

"Reliance on immigration is not an option. For the number of immigrants to equal
the number of births, it would be necessary to take in 1 million migrants annually.
At the end of 2004, the number of registered foreigners was only 770,000. The
acceptance of 1 million immigrants annually is not practical."

-- Perhaps not. But why set the bar so high? Even 100,000 immigrants annually
would make a difference. If selected for their skills, the economic significance
would　be even greater.

SO WHAT MEASURES SHOULD BE TAKEN TO DEAL WITH THE GRAYING OF SOCIETY?

We are at the stage where the policy objective should slow the decline in population
by boosting the total fertility rate to around 1.8. Children will be payers of taxes
and　insurance fees in the future and will support seniors. The government, industry,
and the people must realize that raising children is a type of external economy
effect. We must try our ingenuity at devising a mechanism whereby women can
go back to work after raising children."

-- Yes. But first the Japanese must try their ingenuity at formulating incentives
for people to marry.

-- Burritt Sabin

(Note: JIN will not appear over the Golden Week holiday.)
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EDITOR
Written and edited by Burritt Sabin (editors2@japaninc.com)

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