Global supply chains are being reorganised as Western countries attempt to decouple from the Chinese economy and firms are increasingly aware of the risks of supply chain disruption after COVID-19-related lockdowns. Many countries have implemented policies to support the restructuring of global supply chains and Japan is no exception.
In 2019, the Japanese government strengthened export controls on military and dual-use products and technologies, following the US lead. Japan also provided subsidies to firms that onshore high-risk digital, green and health-related products. That move attracted a frontier Taiwanese semiconductor producer, TSMC, to Japan drawing subsidies of up to US$4.5 million.
In May 2022, Japan enacted an economic security law. It aimed to construct resilient supply chains of ‘critical products’ by providing financial support to producers of these products and asking them to provide reports about their procurement and production.
One major goal of these policies is to reduce Japan’s reliance on China and construct more resilient and secure supply chains. The Japanese economy appears a little closer to achieving this goal. China’s share of imports of parts to Japan declined from 29.5 per cent in 2015 to 26.1 per cent in 2021. The corresponding share for Australia increased from 23.5 per cent to 29.8 per cent.
But despite the stricter export controls of high-tech products, exports from Japan to China did not decline. Total exports from Japan to China increased from US$132.8 billion in 2017 to US$163.9 billion in 2021. Even exports of semiconductor-related products from Japan to China have shown an increasing trend for the past four years.
Authors: Helani Galpaya and Ramathi Bandaranayake, LIRNEasia
Having stagnated for years, the percentage of South Asians who have used the internet has finally reached 50 per cent. In South Asia internet use is synonymous with social media, with most users spending all their time on chat applications. Many of these users have low digital skills and are often passive consumers in a digital world that attempts to influence, and at times misinform and manipulate, them.
Another smaller group are more active consumers, working digitally on global remote-work platforms and earning much-needed income. But even their labour can be an unwitting participant in these manipulation efforts.
Like other regions, South and Southeast Asia have seen a growing debate about ‘information disorder’, a term including misinformation, disinformation, mal-information and hate speech. This is not a new problem. False and hateful content has long been spread by governments, individuals, special interest groups and other entities through non-digital means. But digital technologies enable a higher volume of information to spread faster and with greater reach.
Information disorder can be spread by actors with different motivations. In the political arena, organised online disinformation campaigns such as ‘IT cells’ in India, ‘troll factories’ in the Philippines, ‘buzzers’ in Indonesia and ‘cyber troops’ in Malaysia seek to influence electoral and other political outcomes. These campaigns can also cross borders. A 2020 EU Disinfo Lab report described an operation they dubbed ‘Indian chronicles’, which ‘resurrected dead media, dead think-tanks and NGOs’ as part of an attempt to undermine Pakistan internationally.
Likewise, Doublethink Lab in Taiwan observed operations based in China and Taiwan pushing narratives such as ‘democracy is a failure’ targeting Taiwan’s 2020 general elections. Hate speech against ethnic minorities also spreads online. Serious anti-Muslim sentiment online …continue reading
When the temple asks, the temple shall receive…five-fold.
Horyuji Temple in Nara Prefecture is one of the many Japanese landmarks that suffered a severe lack of tourists during the pandemic. Select Buddhist temples in Japan charge a small entrance fee to enter the temple grounds, and without that vital revenue Horyuji has had trouble keeping up with maintenance costs.
Along with taking part in creative Adult School Field Trips, on June 15, the temple also launched a crowdfunding campaign on Japanese website Readyfor, with a goal of 20 million yen by July 25. However, much to the temple’s surprise, they surpassed five times that goal in just eight days when they raised a staggering 100 million yen. As of June 27, the donation pool is currently over 118 million.
▼ All for the sake of this lovely building.
So, what makes Horyuji Temple such a big deal? In 1993, it was designated as a UNESCO World Heritage Site. It was originally built in the year 607, and while parts of the temple have been rebuilt due to age and disasters, the main hall allegedly remains the oldest wooden building in the world. Besides that, many people visit the temple to see its impressive five-story pagoda, historic Buddhist statues, and more.
Naturally, temple staff are floored by the outpouring of financial support and made an update profusely thanking everyone that has donated so far. They did note that donation perks (such as having your name published on the temple’s official site, a special access praying experience, and so on) will no longer be available due to the sheer number of donators. A good problem to have, we’d say!
▼ Would you think that something this historic could look this nice?
Gender inequality is a stubbornly entrenched problem for Japan. It ranked 120 out of 156 countries in the World Economic Forum’s Global Gender Gap Index (GGI) Report 2021, which measures the gap between men and women in political representation, economic empowerment, education and health. This puts Japan at the bottom of the ladder among the developed world.
In comparison, neighbouring China, South Korea and Singapore were ranked 107, 102 and 54 respectively, while the United States, Canada, Australia and the United Kingdom were ranked 30, 24, 50 and 23 respectively. What is remarkable about these reports is the fact that Japan’s ranking has not improved over time, unlike in other countries.
In 2006, the first year the Report was published, Japan ranked 79 out of 115 countries while France and Bangladesh ranked 70 and 91 respectively. France and Bangladesh gradually narrowed their gender gaps, rising to 16 and 65 by 2021. Japan has not followed the trend of other countries — even those not considered ‘advanced democracies’ — in closing the gender gap.
Japan’s poor GGI ranking is due to women holding low status positions in the workforce and the underrepresentation of women in politics. Although 77 per cent of Japanese women work today — a higher rate than the OECD average of 66 per cent — more than half of them are employed in non-regular roles. In comparison, less than a third of working men hold non-regular positions. ‘Non-regular’ work includes temporary, part-time or casual jobs that offer limited security, few benefits, low wages and low prestige.
Japanese women’s salaries hardly rise throughout their career. Men and women usually start working in their 20s, where they receive similar <a target=_blank …continue reading
Japan is shrinking and ageing. The population fell by 618,000 last year and Japan’s society is the oldest in the world with almost 30 per cent of the population aged over 65. In 15 years that share will be one-third. There are 80,000 centenarians and the number is growing.
Each person of working age will need to support more in society as longevity and a low birth rate continue to age Japan. That rising dependency ratio means productivity growth will become even more important to sustaining the living standards of the population.
Japanese society faces that challenge with an eye-watering government debt of 270 per cent of GDP — the highest on record, ever, for any country — compared to 137 per cent in the United States or 48 per cent for Australia, for example. Government debt continues to increase with Japan’s ‘silver democracy’ making it difficult to cut back rising healthcare, aged care and pension costs. Defence spending is rising and there are no plans in sight for chipping away at government debt.
Before COVID-19 Japan had started to unlock immigration, gradually. Even if that resumes when Japan opens up its borders, it would barely make a difference.
Maintaining living standards in Japan will depend on rapid productivity growth.
The two prime ministers who have managed to stay in office for longer than one year since the turn of the century — Junichiro Koizumi and Shinzo Abe — made some progress on reform, but a reform weary society meant progress was limited. The two steps forward from Mr Koizumi’s privatisation and deregulation in the early 2000s were met by one step backwards after he left office.
Mr Abe’s ambitious Abenomics reform package failed to fire on structural or supply side reforms that would have boosted productivity. Instead the arrows that fired were …continue reading
Author: Richard Katz, Carnegie Council for Ethics in International Affairs
For six long months, the Kishida administration, aided by outside advisors from universities and new companies, toiled to translate Prime Minister Fumio Kishida’s mantra of a ‘new form of capitalism’ into concrete policies. The rather hollow end product that the Cabinet approved on 7 June 2022 must have disappointed many of the participants.
When it came to the foundational principle — that healthy growth and a more equal distribution of income needed each other — Kishida surrendered to critics in the ruling Liberal Democratic Party (LDP) and financial markets who wrongly accused him of promoting socialism. In reality, promoting redistribution to reduce inequality and improve consumer demand is a longstanding ingredient in the standard macroeconomic recipe.
Some critics claim that rather than distribution measures, Kishida would achieve better wage growth through reforms that enhanced labour productivity. While that’s necessary, it is no longer sufficient to boost wages. Wages in the last few decades have stopped increasing in proportion to productivity growth in many countries. This wage gap is worse in Japan than in other rich countries.
The result is a Japanese policy document full of rhetoric about attaining a ‘virtuous cycle of growth and distribution’ — with few substantive measures to achieve it. It is equally weak on how to achieve its growth-boosting goals, such as the declared objective of a tenfold increase in start-up companies.
Kishida’s surrender began just after his inauguration in October 2021. During the ‘Kishida shock’, stock prices fell in response to his call for higher capital gains and dividend taxes so that multimillionaires would no longer pay lower tax rates than upper-middle class citizens. Kishida quickly withdrew.
The backpedalling continued, when Kishida decided that he could not afford to offend Keidanren, the big …continue reading
While the Japanese media were occupied by the Russian invasion of Ukraine, Japan’s economic security bill passed without strong opposition in the Diet in May 2022. Reflecting increasing concerns about China’s trade obstructionism and economic espionage, the bill outlines measures to defend Japanese supply chains, infrastructure and leading technology. But the new security policy will have uncertain effects on Japanese security and business.
Focussing on four areas of economic security — supply chains, basic infrastructure, leading technology and patent publication for sensitive technologies — the law enables the national government to intervene in Japanese companies’ dealings with foreign companies.
The law encourages Japanese companies to diversify supply chains with critical materials, while the government provides funds for diversification if companies meet certain conditions. If the procurement and supply of basic infrastructure have the potential to facilitate foreign obstruction, the government identifies the sector and orders it to provide a pre-made procurement or supply-planning plan to ensure the safety of their infrastructure. The law lists 14 sectors, including electricity, water supply and information technology, as candidates to become ‘specified social infrastructure businesses’.
For the protection and promotion of leading Japanese technology, the law requires the national government to create a technology council — composed of government officers, experts and think tanks — and to commission research to think tanks. The government can suspend the publication of a patent if the product is found to be security-sensitive technology.
While the business sector expressed concerns about the new regulation, the only clear objection came from the Japan Communist Party. Other political parties generally agreed to the bill. A nationalistic conservative group of the Liberal Democratic Party supported the bill to counter China, asserting the importance of creating strong national security institutions. Moderate conservatives also supported the bill, arguing that …continue reading
Gender inequality and the underutilisation of women’s labour continues to be a significant issue in Japanese society. Japan ranked 139among 156 countries for women’s participation in management positions. According to a Japanese government report from 2020, women occupy only 9.9 per cent of the legislature and 6.6 per cent of corporate department head positions.
Closing the gender gapwould add 5.8 million employees to the Japanese workforce and lift gross domestic product by 10 per cent. But despite the government’s efforts, gender equality in the labour market has been slow to progress.
Former Japanese prime minister Shinzo Abe’s ‘Womenomics‘ approach attempted to empower women’s economic growth in various ways. One major effort to boost women’s leadership development is the ‘Act on Promotion of Women’s Participation and Advancement in the Workplace’ that took effect in 2016. The Act forces government agencies and private corporations with more than 300 employees to create action plans for women’s leadership development and to publicly disclose these plans and their progress.
But this policy failed to reach its goal of having women occupy 30 per cent of managerial positions by 2020. The reasons for this are systemic, structural and sociocultural. Examples of restrictions include the lack of childcare, the underutilisation of paternal leave, labour intensive work and the failure of employers to hire and promote women into leadership roles.
The internet once promised a world of seamless connectivity for anyone with access to a digital device. As connectivity costs fell, the workplace became mobile, and digitalisation transformed industrial sectors, the laissez-faire agenda of digital developmentalists appeared to align with and promote democratic ideals.
That was then. Today, even as cloud computing and digital transformation agendas have become mainstream, it is clear the threat of digital fragmentation must be actively addressed.
The COVID-19 pandemic and associated lockdowns and social distancing accelerated an e-commerce boom and digitalisation globally. The uptake was most remarkable in Asia with 60 million new digital consumers in Southeast Asia. Over half of South Asians have experienced using the internet. Many can now work from home, access healthcare online, and touchless pay is widespread. Fax machines are finally starting to be phased out in high-tech Japan.
Greater digitalisation and access to digital service will be central to productivity growth. Distance matters less and transaction costs are close to zero. Data is also non-rival — one company’s use of data need not impede the use of the same data by others — so barriers to the free flow of data are even more costly than those for physical goods.
As different rules around privacy, cybersecurity and digital sovereignty emerge to thwart interoperability, fragmentation is impacting both governance and infrastructure. Digital borders in China, cross-border data restrictions in Europe and America’ disavowal of Chinese telecom equipment make for increasing disconnection.
Even as digital services and the online world collapses space and time, the connection to the real world means that distance still matters. The movement of goods, people and capital is increasingly underpinned by data and digital services. Fragmented digital regimes will impede real economic activity between countries. Conversely, regional interoperability and moving towards a digital single market will unleash productivity, …continue reading
Are the Himalayas too high for the internet to pass? The prospect of an Asian digital single market seems remote, especially when India and China seem to be pulling apart. India is busy banning Chinese apps like TikTok, while China promulgates ever stricter rules on data transfer abroad. Asian governments still fail to see that rising above local conflicts might yield enormous dividends, strengthening their own economic security in the process.
Digital single markets permit consumers and businesses to engage across national borders via the internet. They enable broad supply chains, build companies that can compete at a global level and reduce prices for consumers and businesses. Digital single markets help small businesses by reducing prices for key services from design, marketing, customer relations and accounting to hiring employees in foreign countries. But achieving a digital single market is not easy. It requires a degree of regulatory integration that few countries are prepared for. Nations typically agree to abide by the country-of-origin principle, allowing a company to operate across regional markets under the rules of its home country.
Many of the benefits of a digital single market can be achieved through a digital trade zone. Digital trade zones do not require the high degree of regulatory integration or recognition required by digital single markets. Digital trade zones require the dismantling of barriers to trade, but still oblige companies to abide by the laws of the countries where they do business. While digital single markets potentially offer greater dividends in terms of reducing costs for businesses, regulatory integration requirements mean that they are often a distant ideal.
Continent-wide digital markets can be enabling, boosting local businesses and consumers in a myriad of ways, including through the reduction of inflationary pressures. Without an ambitious agenda promoting digital trade, Asian countries risk …continue reading