Aiming for Consumption Led Growth in a Mature Economy

ABSTRACT

Recently, cynical arguments asserting 'low growth acceptance' and 'low growth inevitability,' arguments that deny or suspect economic growth, have been proliferating. But a certain amount of positive growth is going to be necessary in order to maintain current welfare levels, particularly in pensions, and there is no reason to believe that negative growth will become the norm just because of a decrease in the labor force. As for the claim that 'economic growth does not lead to people's happiness,' the logical basis is weak. What is important is to avoid the negative spiral of 'lower expectation a lower performance a lower expectation' brought about by the predominance of such cynical outlooks.

In today's mature economy, the growth model of developing countries, which promotes the "sacrifice of today's consumption for the sake of tomorrow's production," cannot be used. More appropriate is the mature economy growth model based on the principle that "enjoying today's wealth will in itself bring about tomorrow's prosperity." This is what is called consumption led growth. It is an economy in which consumption draws forth investment and consumer needs drive technological advances. This type of model is all the more viable in a country like Japan where savings are abundant and where relatively many households have economic leeway.

Currently, the main reason for consumption's stunted growth is the anxiety of the young and the dissatisfaction of the middle aged and elderly. The middle aged and elderly, who otherwise have a high level of assets and income, are dissatisfied with the services field in particular (e.g. healthcare, food, travel, leisure, adult education). Thus, an enhancement of the options available in service fields such as health, medicine, and leisure would be certain to boost consumption as a whole. With such a large amount of unused capacity in the household sector, would not the liberation of latent consumption demand both accelerate economic growth and create a healthier society?