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Japan’s Growth Challenge–Special Case or Herald for the Future, Opening Remarks by David Lipton, First Deputy Managing Director, IMF, Seminar, International Monetary Fund, Washington D.C., September 26, 2012
September 26, 2012
September 26, 2012
As prepared for delivery
Good morning. It is my great pleasure to welcome you to today’s seminar on “Japan’s Growth Challenge – Special Case or Herald for the Future”.
With policy makers around the world discussing ways to revive a sputtering global economy, a seminar on how to raise growth in Japan is a deserving topic.
Japan has struggled for the better half of the last two decades to boost economic activity. After years of real growth rates of 4 percent and above, growth slumped in the 1990s, during Japan’s lost decade, and since then never reached the previous high levels.
This year marks a special point in Japan’s quest to raise growth for two reasons:
So, what sort of structural reforms can Japan implement to raise growth? In recent reports we have laid out a number of potentially fruitful avenues:
These are just some examples of how growth could be raised in Japan.
But today’s discussion has also an important global dimension. Japan is no longer an outlier. Its growth challenge mirrors that of many other developed countries: fiscal policy room has been exhausted, policy rates are near zero, and the effects of population aging are becoming more tangible, especially in Europe.
Generating a robust recovery in this environment has become a shared challenge. Governments in many developed countries are pressed to find the right balance between reining in large fiscal deficits to reassure markets and supporting growth. At the same time, the effectiveness of monetary policy has been blunted at the zero-interest bound. And efforts to reform labor markets and protected sectors have to be mindful of their effects on income inequality.
These common challenges raise a broader set of questions, which today’s distinguished panel should discuss:
First, what can countries in a low–interest low-growth environment do to raise growth? What is the right macroeconomic policy mix, if both fiscal and monetary policy are constrained? What can be said about the sequencing of policies, and is there a common structural reform agenda, especially for aging economies?
Another set of questions relates to distributional concerns. The income gap between the current young and old is rising. How should countries deal with an increase in intergenerational inequity? What can countries do to keep the young people productive and motivated, even though they have to bear the brunt of coming fiscal adjustment?
Finally, how well do we understand the economic implications of aging? Growth models tell us not to worry about changes in the labor force as per capita income can still go up. But there may be other important changes. In particular, is Japan’s struggle with deflation a special case, or is it part of its demographic transition, and what does the latest research tell us about the effects of aging on growth and inflation?
In less than three weeks, global leaders will convene in Japan, as Tokyo hosts this year’s IMF and World Bank Annual meetings. The meeting will be the first such gathering in Japan in almost four decades and will provide an opportunity to see first-hand how Japan has fared after the global crisis and the devastating earthquake from last year.
It is with this in mind that I feel especially vested in today’s seminar.
Thank you very much, and I look forward to what promises to be a fascinating exchange of ideas.
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