Sustaining long-term growth is a common challenge for the global economy; however, Japan is facing a rapidly declining birthrate and aging population ahead of other countries. We will conduct research that will contribute to policy recommendations to help maintain the economic vitality of Japan and contribute to the future development of the global economy. Specifically, we will analyze the role of supply chains within and between industries in the Asian region, the trends in international finance and the global economy, and the mechanisms behind prolonged economic stagnation. In addition, we will engage in multifaceted and integrated research to analyze comprehensive panel data for the elderly, the direction of reform for the integration of social security and tax/fiscal policies, and policy recommendations for economic change and the transformation in the industrial structure caused by the coronavirus pandemic.
Formulating economic and industrial policies requires a deep understanding of domestic and overseas economies; however, research on the international economy has become even more significant as globalization intensifies. Amidst the increasing global uncertainty related to trade and investment, it is necessary to address policy concerns and understand long-term trends. Thus, we will empirically analyze international trade, foreign direct investment, and various other international economic activities in the real economy using a variety of data including microdata from government statistics and our own surveys. We will also examine topics such as Japan's external economic policy, trade policies in other nations, rules on international trade, and the global activities of firms from both legal and economic perspectives.
We will systematically organize place-based policies (PBPs) that take the uniqueness of each locale into consideration. For large cities, which are expected to take a leading role in innovation and international competition, we will identify both the infrastructure that utilizes the economic advantages of agglomeration while curbing the harmful effects caused by congestion and the methods of assisting economic actors. For non-metropolitan regions, we will identify the network and community structures and system designs that will promote structural transformation toward production activities that will generate high-added value via the innovative and sustainable use of each region's locally-specific resources. We will also study policy measures that can optimize the balance between large cities and non-metropolitan regions.
The creation of new knowledge and its exploitation for solving economic or non-economic problems are the foundations for innovations, including the Fourth Industrial Revolution. We will develop original data that will allow us to understand this process, conduct cutting-edge research using these data, and perform analyses that will contribute to the formulation of policies for accelerating innovation. Specifically, we will examine the innovation capability of industries, mechanism of the development of an innovation-enhancing industrial organizational changes, such as vertical specialization, government policies that support research and development (R&D), including the intellectual property regime and setting of technological standards and industry–academic collaboration. We will undertake research from an international perspective that will include international comparisons of innovation performance.
As the public implementation of digital technology occurs and the integration of digital and real space gradually becomes a reality, it is necessary to redesign Japan's socioeconomic system and create new industrial frontiers in order to effectively incorporate technological progress. We are entering an era in which various economic activities are merged around data. In this context, we will study the nature of the policies for overcoming the challenges that Japan's economy faces by considering not only the traditional industry-specific policies but also cross-industrial policies.
Since the 1990s, Japan has fallen behind other developed countries, such as the United States, the United Kingdom, and Germany, by a large margin in terms of its gross domestic product per capita and the increase in its real wage rate. The main factors causing this include the stagnation of the total factor productivity (TFP) and the significant slowdown in capital stock accumulation, including intangible assets and information and communications technology (ICT) particularly since the mid-2000s. This program will update and develop databases concerning the industry-level productivity and factor inputs in Japan and China (Japan Industrial Productivity [JIP] Database and China Industrial Productivity [CIP] Database) and the Regional-Level Japan Industrial Productivity (R-JIP) Database, which measures the TFP for each industry by prefecture. The program will also examine the types of policies required to improve productivity and facilitate investment via empirical analyses using these databases and firm/business-level data.
It is expected that our society and economy will be significantly transformed by the current decrease in population caused by the rapid acceleration of population aging, the intensification of global competition, and new technologies such as information and communication technology (ICT) and artificial intelligence (AI). Therefore, for resource-poor Japan to maintain and strengthen its economic vitality and innovation and drive its growth potential while leveraging its strengths, the utilization of human resources will be of critical importance. We will undertake multifaceted and comprehensive research on the redesigning of employment/labor systems suitable for the age of AI, the development of capacity/skills to complement AI, the required reforms in education/training for such purposes, and the ideal methods of improving the well-being of workers, such as health management. Greater use will be made of original datasets.
One of the major issues afflicting the Japanese economy is the existence of barriers, such as the barriers between permanent and non-permanent employees and between men and women in the workplace. RIETI has been addressing various problems concerning these barriers in the economy. Academia has also been suffering from this problem of barriers, for example, barriers between humanities and sciences, between legal studies and economics, between microeconomics and macroeconomics, and between theory and empirical testing. It is essential to remove these barriers to increase the capacity for innovation and enable organizations to become more sophisticated. The Integrated Research program uses this perspective to undertake research and incorporate new knowledge from other disciplines, such as natural sciences, law, political science, and sociology, into economics and policy studies.
The Policy Assessment program will accelerate Evidence-Based Policy Making (EBPM) by simultaneously researching the ideal form of EBPM and evaluating individual policies. Regarding the research on the nature of EBPM, we will employ a meta perspective to analyze how policymakers should prepare evidence and formulate policies based on such evidence, as well as the extent to which EBPM is practiced. Regarding the evaluation of individual policies, the program will use high-quality microdata and empirical microeconomic techniques to provide credible evidence to contribute to policy making in education, labor, tax, social security, and other areas.
Research Framework for RIETI's Fifth Medium-Term Plan
In the Fifth Medium-Term Plan (FY 2020–2023), RIETI will undertake research using the following framework. To address the various challenges that Japan is facing, including the acceleration of a declining population associated with a rapidly falling birthrate and an aging population and energy/environmental issues, we need to realize "Society 5.0" through the advancement of the Fourth Industrial Revolution, which is the implementation of artificial intelligence (AI), the Internet of Things (IoT), and Big Data. Thus, we must facilitate the public implementation of new technologies and reforms in organizations and people to reconstruct the entire socioeconomic system.
RIETI will use its strengths—conducting theoretical and empirical policy research and offering policy recommendations from an impartial standpoint, designing a research system built on large domestic and overseas networks, and accurately responding to broad policy needs using microdata and other data—to improve the quality of our research and contribute to policy making. The Fifth Medium-Term Plan will specifically focus on research that addresses 1) the integration of social scientific elements and industrial technologies (the so-called integration of humanities and sciences), 2) the use of Big Data from the private sector and the construction of original datasets , and 3) policy evaluation analysis that will contribute to Evidence-Based Policy Making.
Policy research areas with certain commonalities will be grouped and set up as "Research Programs" (see the figure below). Multiple research projects will be conducted under each Research Program. Programs may be modified or added as needed by considering the progress of research projects and new research needs promoted by the changes in economic conditions.
RIETI provides discussion forums (e.g., brainstorming workshops and discussion paper/policy discussion paper seminars) and invites policymakers to these forums to improve the quality of our research and build linkages between our research and policies.