Issues Concerning the Revitalization of the Japanese Economy

ABSTRACT

How to pursue industrial regeneration is now the most important issue affecting the Japaneseeconomy. Japanese corporations face two issues: how to eliminate excessive supply capacityand how to rebuild the foundations of competitiveness for the future.

On a macro level, excessive supply capacity totals approximately 92 trillion in excess capacityand 3 million jobs in overemployment. Eliminating this excess supply capacity in one fellswoop, although it would create short-term deflationary pressures on a macroeconomic level, inmid to long-term, it would spread positive effects by increasing efficiency and through thewealth effect.

Ways to promote the elimination of excess capacity include 1) lengthening the deferment periodfor losses associated with facility elimination and 2) deregulating land use. Most importantly,however, corporations must actively eliminate excess capacity without relying on outsidesupport. There are three important aspects to the elimination of overemployment: 1) jobmobility, 2) job creation, and 3) the safety net.

At the same time, rebuilding the foundations of competitiveness must be approached from twoaspects: organizational structure and technological foundations. With respect to organizationalstructure, traditionally fixed inter-business and employment relationships must be made moreflexible in order to enhance their adaptability to change. As for the technological foundations,it is important for corporations to actively systematize the excellent production technology theyhave maintained thus far, and to standardize their in-house technology.

Introduction