About Macroeconomy and Low Birthrate/Aging Population Program

Program Director

KOBAYASHI Keiichiro's photo

KOBAYASHI Keiichiro(Program Director and Faculty Fellow)

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.

The program will consist of the following research projects.

In the international area, we will set up themes such as the "analysis of exchange rates and currency system," "analysis of invoice currency and exchange rate pass-through," and "macroeconomic analysis of current account, capital account and trade structure" and probe each theme through research to deduce the multifaceted policy implications for economic and industrial policies. We will also release data such as the Asian Monetary Unit (AMU) and AMU Deviation Indicators and the Industry-specific Real Effective Exchange Rates for 25 countries including Japan.

Regarding macroeconomic policy, our project focuses on the domestic factors in the Japanese economy and will theoretically examine the relationship between fiscal reconstruction and the financial system—the holder of government bonds—by looking at the stabilization of Japan's public debt as an essential condition for facilitating economic recovery. Regarding Japan's long-term deflation, our research will regard it as a phenomenon that is deeply rooted in problems in the real economy (i.e., the long-term stagnation of the real economy) rather than as a simple monetary phenomenon, and identify the interaction between real and monetary downturns. For example, we will empirically analyze the relationship between the deflation and the labor/capital utilization rates in Japan to examine the reasons behind the chronic deflation. Japan's potential rate of growth will be estimated from the demographic forecast, projected capital stock, and other factors to develop a realistic revenue outlook. We will examine and suggest policy instruments that can be used to reduce the fiscal deficit while avoiding an economic slowdown and restore a fiscal balance that can be sustained over the long term. We will recommend drastic reforms to the tax and social security systems by broadly considering the problems of the existing systems and revisiting not only the tax reforms of the past, but also the social insurance premiums and social security benefits. We will estimate the total factor productivity from the capital stock, workforce size, and past gross domestic product growth rates to estimate the potential growth rate of Japan. In addition, these data will be used to analyze the context behind the persistent decline of the real growth rate in Japan and estimate the contribution of the declining growth of capital stock and the shrinking workforce. Furthermore, we will estimate the employment-promotion effect of reducing social insurance premiums (tax-wedge reduction effect) and the growth-promotion effect of investment subsidies for global warming measures.

There is a growing concern regarding the development of artificial intelligence and automation (i.e., the introduction of robots): Will they steal our jobs? Considering such concerns, we will use data to empirically analyze how the labor market has been affected by automation to date. New data and analytical techniques will be used to identify the effects that automation has had on the labor market and the macroeconomy.