Chicago Shimpo
Visiting Senior LDP Official Discusses Japan’s Economy During His Trip to Midwest

• A senior official of Japan’s leading Liberal Democratic Party (LDP) visited the Midwest from April 29 to May 3, giving a presentation in Chicago about the current status of the Japanese economy and challenges it’s facing.
• Katsunobu Kato, Chairman and General Council of the LDP, visited Illinois and Kentucky to meet with the governors of those states, while visiting local Japanese businesses.
• During his stay in Illinois that followed Kentucky, Kato toured mHUB, an innovation center for physical product development and manufacturing incubator, and a digital startup incubator 1871, both headquartered in Chicago. He also met with Illinois Governor J.B. Pritzker and exchanged views on the Japan-Illinois partnership.

• Ties between the U.S. and Japan remain strong today. Direct investment in the U.S. by Japanese businesses has reached $469 billion to date, creating approximately 860,000 direct-employment jobs. Japanese businesses are also contributing to Illinois economy, operating from 730 bases in the state and employing about 47,000 local workers.

• Kato, in his sixth term as a member of the House of Representatives, has a strong economic background. His resume includes numerous cabinet positions under Prime Minister Shinzo Abe, including former Minister of Health, Labor and Welfare, Minister for Working-Style Reform, Minister for Promoting Dynamic Engagement of All Citizens, and Deputy Chief Cabinet Secretary.
• Last May, Kato visited Washington D.C. as the Minister of Health, Labor and Welfare and exchanged a Memorandum of Cooperation with U.S. Labor Secretary Alexander Acosta to promote further collaboration on labor and employment issues.
• After attending the new Emperor’s accession reception on May 1 held at the Consulate-General of Japan in Chicago, Kato spoke at the Union League Club about his views on Japan’s economy and its issues.

• While concerns are mounting in the area of world economy such as the U.S.-China trade friction, China’s economic slowdown and the U.K.’s Brexit, Japan is staying on its course of economic recovery that began in December 2012 (the beginning of the second Abe administration), Kato said.
• The recovery period is stretching into a record of 73 consecutive months, longest in the post-World War II period.
• Abe’s three-pillar economic policy (involving financial, fiscal and growth-oriented policies) has contributed to the country’s GDP growth of 11.5% during the last six years (from 493 trillion yen to 550 trillion yen).
• This growth is reflected in the current number of people in the workforce at 4.74 million, as well as in the wage increase. The term “base-up,” which means in Japan an across-the-board wage increase, is back on the menu after a long hiatus, and the pay raise agreed in the labor-management negotiations has been more than 2% in the recent years, including the mandatory annual pay hike.
• Kato said young voters tend to support the Abe cabinet, as the extremely low unemployment rate of 2.3% and the active job opening ratio of 1.63 have created a firm labor market that favors them. So the Abe administration will continue its economy-first policy.
• Referring to the ongoing U.S.-Japan trade talks, Kato said the goal should be to bring a “win-win” outcome for the both sides.

Issue of Aging Population and Birth Rate Decline

• During Japan’s first “baby boom” period (1947-1949), approximately 2.6 million babies were born each year. In contrast, only 930,000 births were reported in 2018. The decline is 4.44 million in terms of the working age population aged between 15 and 64. Meanwhile, the baby boom generation crossed the 65-year-old threshold during the last six years.
• The government is encouraging hiring of women and senior workers in an effort to shore up the number of the working population. It’s showing signs of success, as seen in the increase of the working population to 4.74 million.
• But the tendency of an aging society will not stop. In order to bring sustained economic growth and prosperity, Japan needs to build an environment that helps working women and seniors realize their full potential, Kato said. This notion is at the core of the Abe administration’s pet project, “Realization of a Society That Engages All the Citizens.”
• The campaign to “reform working style” is another countermeasure by the government on the labor front. It aims to improve worker’s conditions by promoting shorter work hours, equal pay for equal value of work, and more labor policies.
• Women’s employment rate in Japan, in simple terms, continues to grow, now surpassing that of the U.S. (not considering the difference in the employment status of “regular” and “non-regular” employment), according to Kato.
• The M-curve phenomenon, represented by a dip in a female employee’s lifetime workforce participation at the time of her pregnancy and child rearing, is also showing a change that indicates some progress, Kato added.

Elements of Economic Growth

• The factors that drive economic growth are often said to include accumulation of capital stock, increase in labor inputs (number of workers or labor hours), and increase in the “total factor productivity” which indicates overall efficiency.
• According to Kato, labor inputs in Japan, negative since the 1990s, turned positive in 2015 thanks to an increase in labor market participation by women and seniors.
• But Japan’s labor productivity has a problem. It’s still at 60-70% of that of the U.S., measured by the nominal GDP (per person/hour).
• Raising the level of labor productivity is one of Japan’s primary issues going forward. The use of advanced technology, such as AI and IOT, will play a significant role toward that goal, Kato said.
• Kato shared the issue of productivity and the possible use of the AI/IOT technology with Labor Secretary Acosta last May, who told Kato, in turn, that the U.S. working population is also declining, at the annual rate of 0.2%.

• Japan will see its baby boomers turning 75 years old in 2025. In 2040, children of the baby boomer generation will become 65. Japan’s working age population is expected to decline by 17% between 2000 and 2025, followed by another 17% decline from 2025 to 2040.
• Faced with such a bleak prospect, the Abe government plans to address the issue by focusing on improving labor productivity and workers’ skills.

Social Welfare Issue

• Kato said that how to achieve and maintain sustainable social welfare hinges on the balance between the support givers and the support receivers.
• The upper threshold of the support provider is generally thought to be 65 years old; but Kato noted that the prospect would change dramatically if the age group of 65-74 switches to the support givers instead of being support receivers.
• The recent government survey on people’s physical fitness shows the senior population in Japan has improved their fitness age, five years younger, over the past 20 years. When people’s healthy life expectancy steadily extends, it becomes critical how the older generation with the ability and desire to work can join the workforce.
• With an eye on promotion of physical wellness and preventive measures, the Abe government is now trying to gather all the relevant health- and wellness-related data to develop Big Data.

• Aging population is also a serious worldwide issue. If Japan comes up with a sustainable solution to this problem, it may help other aging societies in Asia – such as South Korea and Vietnam whose aging is advancing more quickly than Japan, Kato said.

• During the Q&A session following the talk, a question was asked about temporary workers in Japan: Why are there so many temp workers in Japan compared to the other developed countries? Isn’t it the anomaly about Japan among all other developed economies?

• Kato addressed the issue in relation with working women in response.
• It’s true that the number of “non-regular” workers, including part-time and temporary workers, has been growing, specifically among women. But a survey shows that only 12-13% of female workers in the age group of 30-50 are working non-regular jobs “reluctantly.”
• They may be working non-regular jobs because of a variety of restrictions on their side (such as child rearing). But it’s also true that the reality of non-regular workers is not good: they are treated differently from regular, full-time employees. For example, non-regular workers are not paid bonuses, unlike regular employees.
• The Abe government’s recent polices for “reforming work-style” includes one that prohibits “unreasonable differentiation” in treating non-regular workers. It will be applied to large corporations starting in April 2020 and to the rest of business entities starting in April 2021.

Katsunobu Kato, Chairman and General Council of the Liberal Democratic Party in Japan

Chairman Katsunobu Kato speaks at the Union League Club in Chicago.