EDITORIAL: New growth strategy

The government's new strategy for economic growth sets goals that are hard to achieve, but they represent challenges that require and deserve an all-out effort by the government.

The strategy, unveiled by the administration of Prime Minister Naoto Kan, is aimed at freeing the Japanese economy from the grip of deflation as early as next fiscal year and accelerating its expansion to an average annual nominal growth rate of 3 percent during the period to fiscal 2020.

Given that Japan's nominal growth rate has been in the negative territory over the past 10 years, the growth target is extremely ambitious. We commend Kan for demonstrating political will and leadership in rising to such a formidable challenge.

Economic growth, above all, is essential for realizing the "strong economy, strong public finances and strong social security" that Kan envisions.

Kan has shown exceptional enthusiasm about tackling the nation's fiscal woes by indicating his willingness to consider raising the consumption tax to 10 percent. But it will be impossible to restore health in the state finances and repair the nation's troubled social security system if the economy continues to be mired in a deflationary contraction.

Since a demand shortage is the primary cause of Japan's deflation, taking measures to stimulate business investment and consumer spending is vital to pulling the economy out of the deflationary hole and putting it back on a growth track.

But the government needs to adjust its policy approach to the new economic realities of the times.

The government should focus its policy efforts less on stoking domestic demand for products and more on shifting demand to services that help improve the quality of life, such as health care, nursing care and tourism.

As for external demand, Japan needs to be less dependent on exports to markets in the United States and Europe for growth since these markets have become less dependable. More effort must be made to create new external demand for Japanese exports, such as tailoring products to the needs of emerging and developing countries and developing overseas markets for products and services that help stem global warming.

The government's job is to create an environment and rules that support corporate efforts to adjust to changes taking place in the world.

The new growth strategy cites seven strategically important areas, including environment and energy, health care, Asia and tourism, and 21 priority projects. All of them are projects that deserve to be promoted.

But the strategy fails to offer a clear and focused game plan to grapple with the problem of the aging and shrinking of the population, which is the principal structural factor behind Japan's low growth potential.

This is a challenge demanding serious and immediate policy responses from the government. The government must address the touchy political issues of accepting immigrants and raising the retirement age.

Tapping the abilities and talents of women for the sake of society would also help rev up economic growth.

To improve the social foundation for expansion of the role of women in the economy, the government needs to take bold steps, such as nurturing rapid growth of the nursing and child care industries.

The Kan administration's blueprint for growth avoids some issues, apparently out of concern for possible repercussions on the upcoming Upper House election.

One important example is the issue of opening Japan's farm market to imports.

The new program to provide income subsidies to farmers introduced in the current fiscal year will help prop up the nation's struggling agricultural sector.

The government's road map to a brighter economic future with stronger growth should use the program to promote the negotiations for free trade agreements with the United States, China and South Korea. But Kan's strategy raises little hope for such a scenario.

Late last year, Kan led the government's work to develop basic economic policies for the new growth strategy as the minister in charge of national policy under then Prime Minister Yukio Hatoyama.

Kan blamed "a lack of vision and political leadership" for the failures of all of the more than 10 growth strategies announced by the previous governments led by the Liberal Democratic Party in the past decade.

Now, the new strategy will test Kan's own vision and political leadership.

--The Asahi Shimbun, June 19