Conference Presentation, Panel
Japan's Economy, Jump-Started
Milken InstituteKotaro Tamura, Lawrence Ho, Daisuke Iwase, Mitsumaru Kumagai, Aya Murakami, Takao Ochi, HONG LIU
- Foreign investor engagement in Japan is expected to intensify through shareholder proposals and corporate dialogue, with significant market structural shifts anticipated within two to three years as policymakers deem current governance improvements insufficient.
- The Japanese government plans to announce new investor-corporate guidelines this year and introduce policies to recruit foreign specialists, shifting away from strict opposition to "pure immigration" to address a projected long-term decline in the working population to 30 million by 2060 and a total population of 80 million.
- Immigration is viewed as essential for sustaining long-term economic growth and covering a tax revenue deficit where social security costs equal half of tax expenses, supported by a stable Prime Ministerial approval rate around 43% that suggests the current administration will not end quickly.
- Tourism metrics project inbound visitor numbers reaching 40 million by 2020 and 60 million by 2030, while foreign tourist consumption is forecast to rise from $40 billion to $80 billion in 2020, driven by an estimated 120 million premium Chinese tourists within seven years from a base of 60 million.
- Economic ripple effects from Japanese Integrated Resorts (IR) are projected at approximately $20 billion annually, with a production inducement effect of at least $60 billion, potentially aiding the service sector's productivity and helping exit deflation through appropriate pricing mechanisms.
- Digital and IoT market sizes in Japan are expected to grow significantly, with the digital-related market reaching $220 billion in 2020 (9% annual growth) and the IoT sector increasing to $100 billion (16% annual growth), leveraging Japanese manufacturing strengths for end-application value.
- The Bank of Japan is expected to achieve its 2% inflation target in fiscal year 2019, subsequently shifting its policy goal horizon to "medium to long term," adopting an "OK rule" allowing 1% inflation if the target is missed, and exiting current monetary policy gradually rather than abruptly.
- The Japanese economy is projected to enter a new phase overcoming deflation with a positive output gap where demand exceeds supply, positioning Japan to benefit from its proximity to China, which is forecast to become the world's largest economy and top tourist exporter.
- Market dynamics are predicted to undergo a "titanic shift" characterized by increased entrepreneurship, active voting by large corporations, and partnerships between large firms and start-ups, while AI software commoditization will occur with value shifting to end applications in services, manufacturing, agriculture, and construction.
- Japan is expected to maintain its status as "wise capitalism" with small income gaps, few health issues, and high longevity to attract investors, while the global economy is anticipated to be driven by China's high savings rate exceeding 40% and resulting global consumption patterns.