Japan must strengthen its economy to survive with a strong yen
(From The Japan Times September 1 issue)

円高を生き残る社会

As the Japanese economy is battered by a recent rise of the yen against the dollar to a 15-year high, the Bank of Japan decided Aug. 30 to inject more liquidity — an additional ¥10 trillion at a low interest rate on top of the ¥20 trillion under the existing lending scheme — into the economy while keeping the key interest rate at 0.1 percent. The government also decided on a framework of additional measures for spurring the economy.

The central bank hopes that the new step will help stimulate the economy and lower interest rates, thus applying a brake on the rise of the yen. But the BOJ and the government should not be distracted by optimism. The strong yen is due to the prospect of the long stagnation of the U.S. economy.

The United States will not support the idea of the BOJ intervening in the currency market because the Obama administration is enforcing a policy of doubling U.S. exports to compensate for a decline in domestic demand.

Japan must strive to turn its economy into one that can survive and thrive even in a strong-yen environment.

To help underpin the economy and change people's lifestyles from the viewpoint of promoting the fight against global warming, the government decided to prolong "eco-point" incentives for eco-friendly products and residences, which were to end in December. It should strengthen financial support for small and midsize firms suffering under the current situation. Larger firms should take advantage of the strong yen to reduce their costs.

To help expand domestic demand in the long run, the government should beef up direct financial support to enterprises and vocational training programs for increased employment. Efforts to revitalize local cities through people-friendly urban redevelopment will help increase domestic demand. The government should diligently push its economic growth strategy adopted in June to bolster the economy's basic strength.

15年ぶりの円高水準に対し、日銀は政策金利を0.1%に据え置き資金を供給すると決定した。日銀は経済が活性化と金利低下による円高抑制を望んでいるが、日銀と政府に楽観視は許されない。強い円は米国経済が長く低迷するとの見込みが原因だからだ。オバマ政権は米国の輸出を倍増して国内需要低下を補う政策を強化しており、日銀による金融市場介入を支持しないだろう。

雇用を改善し長期的に国内需要を拡大するため、政府は企業や職業訓練制度への支援を強化すべきだ。人に優しい都市再開発を通して地域を活性化させれば国内需要も高まる。政府は6月にまとめた経済成長戦略を実行し、円高に強い体質をつくるべきだ。