Priorities for the Japanese Economy in 2015 (January 2015)

Researchers Must Tackle Big Themes

Senior Fellow, RIETI

In this column, I would like to consider the roles that researchers including myself should be playing in addressing big themes. The term "big themes" refers to important research themes that deal with major problems facing Japan or the world and to which no quick solutions are available. In what follows, I would like to discuss three specific examples.

Problem of lost three (?) decades

Over the past several years, the Japanese economy appeared to have made a successful recovery, so much so that it was said at one time that "Japan is back." However, the latest data on Japan's gross domestic product (GDP) for the July-September quarter of 2014 turned out to be far worse than expected and the Japanese economy might be once again heading into doldrums. The Japanese economy remained stagnant throughout the 1990s, and the phenomenon was referred to as Japan's "lost decade." Despite a series of economic stimulus packages, the stagnation continued and people began to call it the "lost two decades." In the current upward phase of the economic cycle, the government and the monetary authority have successfully driven down the value of the yen with the help of unprecedented quantitative and qualitative easing. However, the effect of this last-resort measure may turn out to have had a limited effect on the recovery of Japanese economy, and the possibility of the Japanese economy heading into yet another lost decade has now become a matter of serious concern. Can we prevent the realization of the "lost three decades" and how can we manage to do this? Finding answers to these questions is one of the big themes.

Problem of elderly care

While people are living longer, the gap between such extended life expectancy and healthy life expectancy (i.e., the length of time people live independently without relying on nursing care) is widening. As the number of children is decreasing, Japan's population is expected to decline further in the future. All of those factors are forcing Japan to face enormous changes, those that have never been seen before. What to do with the care of the elderly is the form in which those changes will likely manifest and pose the most serious problem.

There exists a gap of about 10 years between Japanese people's life expectancy and healthy life expectancy, meaning that elderly people need to be taken care of by someone for that duration of time. Since there are fewer children per household, family caregiving with siblings taking care of their aging parents in turn is becoming an increasingly difficult option, if possible at all. In addition, many married couples are without children, and the proportion of unmarried people is on the rise in Japan. The question of who will take care of those individuals in their old age remains unanswered. A significant number of nursing care facilities have been established already, and there are many more being built or planned. However, will there be enough capacity to accommodate the growing demand for nursing care services? Even if there is physical capacity, will elderly people in the future be able to afford the services provided by such facilities? If not, who will bear the cost will arise as a major issue. Although high expectations are placed on the development of drugs to prevent or cure dementia, tangible results are hard to come by in reality, and many large pharmaceutical companies have pulled back from this field after failed attempts to invent innovative new drugs (Note 1). The development of nursing care robots is another area of growing expectations, but again it is questionable whether robot caregivers will be capable of providing care attentive to specific individual needs. It is dangerous to make plans for future care services based on the assumption that such innovative drugs and nursing care robots will become available.

An increase in the number of people involved in caregiving to their family members leads to a decrease in the overall workforce because such family responsibilities make it difficult for them to work outside. The importance of promoting greater participation of women in society has been highlighted recently. However, this would end up being a pie in the sky if they are unable to outsource their caregiving responsibilities to outside service providers. How to accommodate the growing needs for nursing care services amid the rapid aging of Japan's population is another big theme.

Problem of shrinking regions

"Regional revitalization" is one of the recent catchphrases that we hear. In reality, however, this is a very serious theme. When its population declines, a country is bound to become sparsely populated unless people move to certain areas and form agglomerations. This poses a particularly serious problem in a society whose economy is becoming increasingly services-oriented. Unlike manufactured products, services produced in one area cannot be transported to and consumed elsewhere. Thus, as a general rule, many services cannot be profitable without the presence of a sizeable population in the nearby areas (Note 2). Indeed, it is already difficult to sustain medical services as a business in scarcely populated areas in Japan. Physicians as service providers want to open their clinics in areas where they can expect a sufficient number of patients as customers to secure profitability. The inevitable result of this is a shortage of doctors in scarcely populated areas.

This problem is difficult to solve unless people gather and live in a limited number of areas. This is the case not only for private-sector services but also for public services; without an adequate concentration of people, the cost of public services per person would become exorbitant. Since a population decline is a force in the direction opposite to agglomeration, it is imperative to come up with and put into practice ways to entice people to congregate and live in particular places.

However, this is an extremely difficult task in reality. It may be painful to ask elderly people to leave their homes. Even if they agree, they may not have sufficient financial means to do so, as prices of real estates in such depopulated areas would go down sharply. Also, it would give rise to the question of who is going to manage the unpopulated regions (abandoned farmland and forests). Even if the necessity of agglomeration is understood by the public, a consensus as to where people should congregate is unlikely to be formed.

The gaps between politics and reality are another problem. It is politically tempting to tell people that regional revitalization would work well for all regions, a story that cannot be true in reality. It is highly questionable whether Japanese politicians will be ready to accept the more realistic story that as the Japanese population is to decline, people had better congregate and live in some areas designated for habitation and make arrangements for the other areas so that they can be maintained adequately without people living there. Exploring what sorts of regional revitalization policies would produce a desirable outcome under the given political circumstances is another big theme.

Roles of researchers

All of the three problems mentioned above are very serious, complicated, and unavoidable. And yet, that is not the end of the story as Japan faces a number of other, equally critical problems that should be described as "big themes."

Are we, researchers, working earnestly on those big themes? I am afraid to say that there is much room for improvement in this regard. Stephen Van Evera, a political scientist, said, "Large parts of social science have already diverted their focus away from the important to the easily observed, thereby drifting into trivia" (Note 3). It may be the case that, at least in the realm of political science, scholars tend to focus too much on trivial questions, upon which it is easy to write research papers, rather than working on big themes such as how war could be avoided.

Offering a similar idea, Professor Osamu Shimomura, a Nobel laureate in chemistry, wrote the following (Note 4):

It appears to me that today's researchers have a tendency to avoid tackling difficult themes. They would take up research themes in which they are sure to find answers but they would shy away from questions that have no ready answers even before trying.

The tendency pointed out by Professor Shimomura may be found among researchers in the field of social science. Answers for big themes are neither readily available nor may ever be found in some cases. However, if there is any possibility of contributing to the society of Japan and the world as a whole (or more specifically to the happiness of our own children's generation) by tackling those big themes, earnest efforts should be made toward that end and such efforts should be rewarded in some way or another. The problems of the lost three decades, elderly care, and other big themes are all so huge and answers are hard to find. To be honest, I feel tempted to run away from those issues. Partly in a bid to give encouragement to myself, I would like to conclude this article by quoting another set of Professor Shimomura's words (Note 5):

There is no such thing as predetermined success. I want to tell young people in Japan repeatedly: Keep on. Keep on. Don't give up easily.

December 26, 2014
  1. ^ Andrew Ward, "David Cameron launches world's biggest dementia study." June 18, 2014. Financial Times.
  2. ^ Morikawa, Masayuki (2014), Productivity in Service Industries: Empirical analyses using microdata (in Japanese), Nippon Hyoronsha Co., Ltd.[MN1]
  3. ^ Van Evera, S. (1997), Guide to Methods for Students of Political Science, Cornell University Press.
  4. ^ Shimomura, Osamu, Watashi no Rirekisho column in the July 31, 2010 issue of Nihon Keizai Shimbun.
  5. ^ ibid.

January 20, 2015

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