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The Japanese economy, the world’s second largest, may be sliding into a recession with serious global repercussions. Inflation is at a ten-year high, incomes remain stagnant, and rising commodity prices are hurting Japanese manufacturers. With the country still struggling to recover from the downturns of the 1990s, Japan’s policymakers are
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working to find innovative solutions to these new economic and financial woes. Will Japan avoid a hard landing? How will its policy decisions impact the United States, one of its largest trading partners?
At this AEI event, Robert Alan Feldman, managing director of Morgan Stanley Japan, will discuss these and other questions. Topics will include the current state of Japan’s economy, prospects for future improvement, and the implications of this downturn for political and economic relations between the United States and Japan. AEI’s Desmond Lachman will respond, and Michael Auslin will moderate.
| 10:15 a.m. | Registration | |
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| 10:30 | Presenter: | Robert Alan Feldman, Morgan Stanley Japan Securities Co. |
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| | Discussant: | Desmond Lachman, AEI |
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| | Moderator: | Michael Auslin, AEI |
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| 12:00 p.m. | | Adjournment |
Japanese Economy Needs Urgent Reforms, Economists Say at AEI
WASHINGTON, SEPTEMBER 18, 2008--As the global economic situation worsens, Japan faces some hard political choices. At an AEI event on September 17, economist Robert Alan Feldman of Morgan Stanley Japan described Japan's economic distress and argued that the Japanese government will have to implement immediate reforms if it is to weather the storm.
GDP growth in Japan is projected to slow significantly in the next two fiscal years and imports and exports are expected to decline. With a rapidly aging population with fewer people working and declining wages, Japan's economic forecast looks bleak. These trends, Feldman explained, are compounded by a population unwilling to spend their savings because they are "fearful for their future." If these economic trends continue unchecked, Japan will be hard pressed to maintain the high living standards to which its citizens are accustomed.
Feldman suggested political and economic reforms targeted at increasing the productivity of industries and workers. These reforms would not only allow Japan to maintain its current living standards with fewer workers, he said, but they will also encourage more efficient production of food and other commodities, which will help address global shortages. Other reforms--including increases in immigration, liberalization of farmland trading, and tax reforms, to name a few--would prepare Japan to absorb changes in the global economy more easily.
The ongoing U.S. economic and financial crisis is also contributing to Japan's economic woes, according to AEI resident fellow Desmond Lachman. He called the economic outlook for the United States "the most difficult economic situation that [it] has faced probably in the last seventy years"--and he said that the series of shocks hitting the United States in the form of the housing market bust, commodity scarcity, and the credit crisis have all had direct implications for Japan.
While both Lachman and Feldman painted a dark economic picture for Japan and the world, Feldman expressed some optimism. He argued that during times of crisis, countries often implement the much-needed reforms they have ignored in halcyon economic times. He noted that "growth responds to reform" and that if the Japanese and U.S. governments can implement constructive changes, the situation will eventually improve. For the short term, however, both countries must be prepared for a rocky ride.
--JENNIFER GREGG
For video, audio, and more information about this event, visit www.aei.org/event1791/. For more information about AEI's Asian Studies program, visit www.aei.org/asia/.
For media inquiries, contact Véronique Rodman at 202-862-4870 or vrodman@aei.org.
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