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Britain's Defence Secretary Ben Wallace listens to Japan's Prime Minister Yoshihide Suga at the start of their meeting at the prime minister's official residence in Tokyo, Japan, 20 July 2021. (Franck Robichon/Pool via REUTERS)

Author: Ken Kotani, RUSI

When asked about Japan participating in the Five Eyes intelligence-sharing alliance, ex-US and British intelligence officers usually claimed it was difficult because Japan differs in culture and language. This situation has dramatically changed in recent years.

Last year, UK Prime Minister Boris Johnson made positive remarks about Japan joining the alliance. Former US deputy secretary of state Richard Armitage also wrote that ‘the United States and Japan should make serious efforts to move toward a Six Eyes network’. Japanese security scholars Richard Samuels and Brad Williams similarly mentioned the possibility of Japan’s participation in the alliance in their recent studies.

Meanwhile, Japan’s ruling Liberal Democratic Party (LDP) published a December 2020 report, ‘Towards Establishing an Economic Security Strategy’, outlining that Japan ‘should seek to join the Five Eyes alliance’. In view of the recent Chinese maritime expansionism in Southeast Asia, a regional ‘handshake‘ between the Five Eyes and Japan seems inevitable. Yet specific talks have not progressed at all.

After the Second World War, the Japanese government refrained from establishing a robust intelligence community because Japanese public opinion opposed stepping into the dark world of intelligence. At the same time, Japan could depend on US intelligence during an emergency. This prevented the establishment of an overseas intelligence apparatus, like the CIA or MI6, making it difficult for Japan to contribute any HUMIT intelligence to the Western security alliance.

But Japan incrementally increased its defence and security capabilities over the decades and the government now manages seven high-performance reconnaissance information gathering satellites (IGS). The resolution of the latest version launched in 2020 is reported to be less than 30cm, enabling it to identify a human head from outer space. The Japanese government also plans to launch …continue reading

    

University students attend a job fair at Makuhari Messe in Chiba, Japan, 1 March, 2019 (Photo: Naoki Morita/AFLO).

Author: Yuri Okina, Japan Research Institute

The Japanese labour market has undergone significant change since the early 2010s when the baby boomer generation began to retire, expanding opportunities for women, the elderly and other groups. But COVID-19’s economic impact is challenging the gains of the past decade. The employment rate has reversed its upward trend, declining along with salaries and hours worked, while unemployment rose from 2.4 per cent in 2019 to 2.9 per cent in June 2020.

Looking at COVID-19’s impact on the Japanese labour market, there are two key takeaways.

The first is that the increase in unemployment is modest compared to the decline in economic activity. Many non-regular workers — disproportionately women, youth or older workers — who lost their jobs during the first state of emergency in April 2020 chose not to look for new employment and so fell out of the labour force. This partially explains why the unemployment rate remained low.

The Japanese government also expanded the employment adjustment subsidy, which enabled businesses to put workers on temporary leave while keeping them nominally employed. To respond to the sharp decline in consumer demand, companies reduced employees’ overall number of hours. So Japan’s primary method of labour force adjustment to the pandemic was a generalised reduction in working hours.

As of 13 August 2021, the government had approved four million applications for over 4 trillion yen (US$36.3 billion) in subsidies, which blunted the impact of COVID-19 on employment. The subsidies enabled creative work-sharing arrangements where employees from heavy-hit sectors — such as the airline industry — could be temporarily dispatched to work in less-impacted sectors such as retail. Both small- and medium-sized enterprises and larger firms benefitted from these subsidies.

The second major takeaway is that, as in other countries, the impact of COVID-19 in Japan varied …continue reading

    

People wearing masks for protection against the coronavirus walk across a scramble intersection in Tokyo's Shibuya area, 20 August 2021 (Photo: Reuters).

Author: Naohiro Yashiro, Showa Women’s University

In June 2021, Japan’s Council on Economic and Fiscal Policy promoted plans for an optional four-day workweek in its annual economic policy guideline. While the policy creates substantial employment benefits for Japan’s aging workforce, the announcement has divided Japanese workers.

Young workers and couples with small children welcome fewer working hours a week, while middle-aged male workers want to avoid their overtime payments from being reduced by fewer workdays. Employers also worry about increasing hourly wage costs without an equivalent productivity growth. If the plan reduces salaries then it may harm the economy by reducing consumption. The key issue is that the program is optional, meaning that the actual effect will likely be limited.

The rapid development of information and communication technologies risks creating a digital divide among middle-aged workers. The government intends to take a larger role in upskilling Japan’s labour force. Traditionally, Japanese firms depended on skill formation through on-the-job training throughout their workers’ lifetime. This scheme is becoming obsolete due to Japan’s increasing life expectancy — 87.7 years for females and 81.6 years for males in 2020. A growing share of college graduate women and resulting two-earner households are also inconsistent with traditional employment practices that are implicitly based on a working husband and a fulltime housewife arrangement.

The optional four-day workweek plan intends to give equal employment opportunities to people with different work arrangements. A significant barrier for working mothers is taking care of small children, which conflicts with the long working hours of Japanese firms. The optional four-day workweek plan improves the balance between work and life and is therefore helpful for child-rearing and family care responsibilities.

The plan also provides more time for older workers to acquire new skills. To accommodate a <a target=_blank href="https://www.eastasiaforum.org/2015/05/03/japans-race-against-the-ageing-clock/" target="_blank" …continue reading

    

This picture shows the headquarters builsing of Bank of Japan (BOJ) in Tokyo 26 April 2021 (Photo: Yoshio Tsunoda/AFLO/Reuters).

Author: Toshitaka Sekine, Hitotsubashi University

More than eight years have passed since the Bank of Japan (BOJ) began its aggressive Quantitative and Qualitative Monetary Easing (QQE) program in April 2013. Despite subsequent efforts made by the Bank, such as the adoption of negative interest rates in January 2016 and yield curve control in September 2016, it has yet to achieve its 2 per cent inflation target — the most recent figures put consumer price index inflation small negative.

This raises the question of what policy options are left for the BOJ if it needs to further increase monetary stimulus. In these circumstances easy monetary policy would remain important, but the central bank would have limited room to manoeuvre. Other elements of the policy mix (or the three arrows strategy of former prime minister Shinzo Abe) would need to play a major role — namely, fiscal policy and a strategy for economic growth.

Any analysis of Japan’s easy monetary policy must focus on how unconventional monetary policy works. Despite the name, unconventional monetary policy is not so different from the conventional sort. The BOJ can stimulate the economy by lowering the interest rate below what economists call the natural rate of interest, the equilibrium rate that equates saving and investment in the economy. When the interest rate is below this level, saving is discouraged (as returns on deposits are low) and investment is encouraged (as firms can borrow money cheaply).

Under a conventional monetary policy regime, the interest rate being adjusted is the short-term interest rate. Once the central bank cuts this conventional rate to zero, it starts cutting the long-term rate through unconventional means such as forward guidance and quantitative easing.

In fact, all the …continue reading

    

Shenzhen International UAV EXPO (World Unmanned Aerial Vehicle Exhibition) is held in Shenzhen, Guangdong Province, China on 21 May 2021 (Photo: Koki Kataoka/The Yomiuri Shimbun/Reuters).

Author: Tsuyoshi Minami, Shanghai Normal University

Japan has been advancing its military modernisation program for several years. The driving motivation appears to be China, which aims to build a ‘world-class’ military by 2050. Japan’s 2021 defence white paper says that trends in the development of the Chinese military ‘have become a matter of grave concern’ to Japan and the region.

Despite significant investment in its Self-Defense Forces (SDF), Japan has been slow to adapt to drone technology. Although armed drones have proven efficiency in conflict, Japan hasn’t acquired any yet; it only has reconnaissance drones.

One reason that Japan has yet to introduce military drones is distance. Japan is an island country, hundreds of kilometres from the Asian continent. Low-cost drones cannot fly across the sea and have therefore been perceived as limited in terms of Japan’s national security, especially in naval warfare.

But military drones, including low-cost ones, are becoming an urgent threat to Japan’s security. In the recent Unmanned Integrated Battle Problem 21 exercise, the US Navy destroyed a surface vessel with a swarm of drones for the first time. Swarming drones is fast becoming an important new strategy in drone warfare.

This poses a new challenge for Japan. One of Japan’s military advantages is high-quality warships. While these are equipped with advanced air defence systems, they are both ineffective and expensive to defend against drones.

According to the 2018 National Defense Program Guidelines, Japan plans to keep 54 warships as the core of its maritime security. As technology advances, Japan faces the risk of losing critical warships to drones rather than traditional missiles and torpedoes.

In response, this year Japan started a development plan for an anti-drone system. The project aims to <a target=_blank href="https://www.japantimes.co.jp/news/2021/01/12/national/japan-lasers-drones/" …continue reading

    

A worker harvests fresh produce from a tower at Sky Greens vertical farm in Singapore, 30 July 2014 (Photo: Reuters/Edgar Su)

Author: Adam Triggs, Accenture and ANU

More than US$16 trillion worldwide is currently sitting in government bonds yielding negative real returns. Meanwhile, the world needs at least US$35 trillion of sustainable investment to avoid the 1.5 degree increase in global temperatures that the UN Intergovernmental Panel on Climate Change warns is now imminent.

To make matters worse, the substantial environmental and economic benefits from sustainable practices like lowering carbon emissions, improving land management and other environmental good practices often go unrewarded by the financial system, even though the returns to society are high.

These paradoxes are caused by markets that are missing for the environment and natural capital.

For too long, the world has relied on directionless governments and the unreliable promises of corporate social responsibility and shareholder activism to manage the environment and natural capital and deliver the investment needed to avoid climate change. It hasn’t worked.

Luckily, there is a better way.

These missing markets are the product of deficient global financial rules, insufficient data and weak institutions. Some national governments are now beginning to struggle with these things, but what they need is international cooperation.

The weight of research shows that businesses and households that have good environmental credentials are also better borrowers. They are less likely to default on their loans and they are less likely to be late on their repayments.

In a well-functioning market where these broader social and economic benefits are properly priced, these borrowers would get lower interest rates and, when these loans were securitized and sold-on in the form of bonds, the bonds would be more favourably priced because the underlying asset is stronger and safer.

This is not what we are seeing. While there are some banks and financial institutions which are increasingly taking environmental credentials into account, we are not seeing it on the scale that the evidence …continue reading