On the other hand, when it comes to external value, it may be possible to estimate the content of new value to some extent by understanding the content of the challenge . The external problems that Japan is currently facing can be roughly summarized as follows .
Contents of the challenge
1 aging and declining birthrate
2 fiscal deficit
3 new industrial revolution
4 Possibility of natural disasters (earthquakes, corona, global warming)
5 Diplomatic /Military Conflict between America and China
These five things should be considered in particular, and we will examine each of their external meanings.
1 aging and declining birthrate
A phenomenon in which the death rate declines and the birth rate declines, resulting in an increase in the number of elderly people, a decrease in the number of children, and a rise in the proportion of elderly people. The cause of the increase in the number of elderly people is the development of medical technology, the decrease in the number of children is due to the increase in the number of single people, and the tendency for women to marry later in life as they enter the workforce. There are many other reasons behind the decline in the birth rate, but the problem is not simply that the birth rate should increase. If the ``working-age population'' cannot be maintained at an appropriate level, there is also the problem that a heavy burden will be placed on the child-rearing generation, who will have to look after both the elderly and children. Population issues are affecting various social situations. The increase in the number of elderly people is also a factor in promoting population concentration in large cities in rural areas due to problems with hospitals in rural areas (for example, population concentration in Sapporo in Hokkaido).
2 fiscal deficit
The government has set a goal to maintain a healthy income and expenditure throughout each fiscal year (primary balance). However, on the other hand, it has eased monetary policy in order to maintain domestic economic growth and has made fiscal spending for various reasons (from the bursting of the bubble to the coronavirus pandemic). The government issued large amounts of government bonds, which were purchased by the Bank of Japan and Japanese banks. If the economic growth rate is higher than the debt increase rate, the fiscal deficit will be eliminated by the increase in tax revenue. However, the precondition for this is that the primary balance and the cost of debt refinancing be equal to the debt growth rate. Japan was in a deflationary situation and the rate of inflation was low, so even if it issues government bonds (which moves the nominal interest rate), the real interest rate has not increased*. Japan's government bonds have been issued in large quantities, and their prices have risen. The background to this being possible is the accumulation of current account surpluses that have continued for more than 20 years. However, on the other hand, these surpluses have been used to cover emergency expenses related to the postponement of the Olympics and the coronavirus pandemic. Japan's private companies (operating overseas) have profits from direct investment, and the country is not yet heavily dependent on foreign debt. Only with economic growth can tax revenues increase and public finances improve, but Japan's deflationary economy has continued to show no signs of improving. Some scholars refer to this deflationary situation as the "medievalization of the world economy," but the situation with overseas earnings means that even if there is no point in investing in Japan, there is meaning in investing overseas. right.
In contrast to economic growth, the aging population and declining birthrate mean an increase in medical and social welfare costs, and we are faced with the problem that compulsory expenses continue to increase at the same rate as the economic situation. Looking at it in this way, it appears that the problem of fiscal deficits is related to the problem of how to allocate a country's assets (portfolio). What is the current account balance obtained from overseas (as domestic population growth is not expected and the multiplier is low, we have no choice but to rely on overseas sources, but it is said that the balance of this current account balance is also on the verge of collapse)? The question is whether only that amount will be sent domestically, or how it will be utilized. This is where the new industrial revolution (Fourth Industrial Revolution) and the reorganization of global supply chains become relevant. This is because the meaning of investing ``domestically'' is gradually increasing.
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