The Combination of Optimal Policies Left in the Hands of the Japanese People

ABSTRACT

In January 2002, the National Institute of Population and Social Security Research announced a new future population projection for Japan. After adjusting the fertility rate prediction from 1.61 to 1.39, the agency predicts that it is inevitable that the total population of Japan will decrease by half during the 21st Century. Consequently, in addition to overcoming the current deflation economy, Japan must also surmount the future handicap of depopulation and an aging society by implementing a range of policies aimed at revitalizing the Japanese economy and society.

Accepting more immigration is often advocated as a method to counteract depopulation. However, it is much more important that a social system is established in which every worker with high will and ability can enter the right job, without regards to nationality, age, or gender, and in which every worker is dedicated to continued self-improvement.

Though the Council on Economic and Fiscal Policy announced its "Structural Reform and Medium-Term Economic and Fiscal Perspectives", it continues to enumerate the problems without displaying any concrete measures. In order for the Japanese economy to enter a new growth trend, it is essential to establish a grand industrial design that will create new employment opportunities in all regional economic areas.

Structural reform of the tax system is necessary to create an efficient money flow into needs-oriented fields. Additionally, the current high benefit level of the social security system must be reduced. Through a 15 percent reduction in the amount of public pensions, 25 trillion yen from the public pension reserve asset can instead be paid back to active workers. Through this scheme, it will be possible to implement a set of policies that can avoid a tax increase as a whole, even if the consumer tax rate is increased.