[paper] Drive in the Microeconomic Level Provides the Only Way Out of Deflation

Haruo Shimada: Professor of Keio University

Haruo Shimada graduated from the Faculty of Economics of Keio University in 1965. He earned an M.A. in Economics from the same university in 1967, and a Ph.D. in Industrial Relations from the University of Wisconsin in 1974. After holding posts as an assistant and an assistant professor in Keio University’s Faculty of Economics, he became a professor in 1982. Since 2000, he has also been Visiting Professor at the University of Tokyo’s Research Center for Advanced Science and Technology. Mr. Shimada is an economist specializing in labor economics and economic policy and acts as a special policy advisor to the Cabinet Office. His many published works include Akarui Kouzou Kaikaku---Kousureba Shigoto Mo Seikatsu Mo Yokunaru (Happy Structural Revolution---How to Improve Your Job and Your Life), published by Nihon Keizai Shimbun, Inc. He has two daughters and one grandchild.

I find that few of the deflation arguments in this magazine are based on the real state of the economy. Deflation cannot be checked by macroeconomic measures. In present-day Japan where the economic structure is dynamically changing, deflation will not end unless entrepreneurs increase their confidence in their business or individuals take challenging actions. Despite the emergence of new potential demands from these structural changes, there is a lack of confident people who are willing to lead us into the “future,” which must be just around the corner. That is what makes it difficult for us to find our way out of the current deflation. My strongest advice is “do not be easily affected by empty macroeconomic arguments.” Such arguments tend to become government-dependent and make it difficult to see the task of individuals, which is to take challenging actions. The same applies to the arguments of a government-lead safety net. The most important point in establishing a national safety net is to prevent the most needy from being ruined for having no means of support. Repeated arguments have been made to increase the budget. However, Japan did not yet have data or strategy on how and for what to use the money. A later survey found that the number of householders seeking jobs and receiving no unemployment benefits, who were the most urgent targets, was 330,000; if so, more detailed and strategic employment measures can be taken. The number of the most needy householders may double as a result of the structural change of the economy, so a strategic safety net should be established. However, those people cannot be absorbed without industrial revitalization and the emergence of new industries. The reason that Japanese private companies are unable to make new progress is that they are not meeting the needs of the new era. What I sincerely feel is that the individual’s morale is completely undermined. As can be seen in the recent movements of special economic zones and deregulation, those who have will are repressed by the government and those without will make no move even if encouraged in present-day Japan. Still, there are many people who have not yet suffered and only expect the government to take some macroeconomic measures. Such mindset is the most serious bottleneck for Japan’s future, which may well put the nation into a decline.