Aspirations upon taking up the post
Masataka Saburi (Director of International Coordination / PR Strategy, RIETI):
First of all, please tell us about your aspirations for becoming RIETI Chairman.
Fukao:
I have been studying Japan’s lost 20 or 30 years; a period of economic stagnation in Japan, and I believe that Japan is currently in a critical situation and is facing various problems such as stagnant productivity and real wages, economic security, the extremely weak yen, a low birthrate and aging population. I decided to assume the position of chairman at RIETI because I believe that RIETI is the best research organization in Japan for envisioning a way out of this long-term stagnation.
I have been a long-term research fellow of the Research Institute of International Trade and Industry (MITI/RI), which is the predecessor of RIETI, since it was headed by Dr. Ryutaro Komiya. RIETI, which was reorganized out of MITI/RI in 2001, is a very open organization, with leading Japanese and prominent foreign researchers conducting research, and micro data such as government statistics are quite freely available. I myself created the JIP Database (Japan Industrial Productivity Database) at RIETI.
RIETI is Japan’s leading think tank in the field of economics and one of the most developed in Asia. We hope to build on RIETI’s strengths and further develop it in the future.
Target Direction of RIETI’s Sixth Medium-Term Plan
Saburi:
What are RIETI's goals for the 6th mid-term goal period?
Fukao:
The new mid-term plan calls for RIETI to contribute more than ever to policy. This is an ambitious plan that asks us to put our policy contributions first, while continuing our research at one of the highest levels in Asia.
This concept of a “think tank whose most important mission is policy contribution” may be considered a return to its roots. Dr. Ryutaro Komiya, Director General of MITI/RI, mentioned that the central mission of MITI/RI is to academically analyze the policy issues facing the Ministry of International Trade and Industry (MITI). In addition, Dr. Masahiko Aoki, the first President of RIETI, stated that as institutional reform has become a Japan-wide problem, RIETI was called upon to go back to the roots of this dynamism and academically clarify the issues involved in trade and industry policy. Therefore, Academic solutions to policy issues are desperately needed today when Japan is in the current state of crisis.
Saburi:
What exactly do you think are the research topics for which policy makers are currently seeking insight?
Fukao:
One of such areas of research is economic security. This is a very important and rapidly changing topic.
The other focuses on trends in the industrial structure. Recently, the Cabinet Office's long-term forecast to 2060 was discussed at the Council on Economic and Fiscal Policy, and I believe that industry-level analysis is extremely important for such long-term forecasts. For example, the potential for implementing artificial intelligence (AI) and robotics varies greatly by industry sector. Macro analysis alone cannot provide a clear picture of how Japan’s industrial structure will change in the future or how Japan’s labor productivity will change as a result, for example, in relation to questions that address how much demand for medical care and long-term care will increase as the population ages, how the international division of labor will change in the future, and whether manufacturing will return to the domestic market. We would like to consider the long-term challenges facing Japan based on the perspective of individual industries which house the experts entrenched in the specific related fields. Regarding the “New Opportunities for Industrial Policy” being promoted by the Ministry of Economy, Trade and Industry, we would like to consider what kind of industrial policy is desirable or undesirable at the level of individual industries.
In the past, the Cabinet Office and others had multi-sectoral input-output models, but now such models are becoming less common worldwide, except in areas that focus on the international division of labor, such as the Global Trade Analysis Project (GTAP). In the project we are currently envisioning, we will also interview people about what jobs can be replaced by AI and robots, and produce estimates for each type of job, but since the capabilities of AI itself are changing, the situation will be quite different today (2024) from the previous study in 2022. What will this look like in, say, five to ten years? It is difficult to predict, but I am excited to talk to experts to find out.
Japan's “Third Crisis” and RIETI's Role
Saburi:
You mentioned earlier about going back to the basics. Do you think the role of think tanks will change as the economy and society change?
Fukao:
I also specialize in cliometrics, and, from a cliometrics perspective, the Japanese economy had three crises in the past. The first was the national crisis from the opening of the country at the end of the Edo period to the Meiji Restoration, and the second was the defeat in World War II. The third crisis is the current long-term stagnation.
In fact, numerous lessons have been learned from the past 30 years of stagnation, and the direction of reform is rather clear. The productivity gap between the U.S. and other technology frontier countries and Japan is widening, which leaves much room for Japan to catch up. I think this is a time of opportunity for Japan, so to speak. We are getting out of deflation, and the percentage of young women in full-time employment is increasing. There is also a movement among companies to return to the domestic market. The spread of new technologies such as AI and robots is underway, and I believe that we are in an era of various opportunities, and this is an interesting time to think about economic and industrial policy.
When RIETI was founded in 2001, the term “think tank” was not well established in Japan. These were the days when the government offices, themselves (collectively known as the “Kasumigaseki” district) said that they were the think tanks. I was wondering if Kasumigaseki is itself now exhausted? In order to break out of the current economic stagnation and survive this turbulent world, collaboration between industry, government, and academia is essential, as it has been during the past two economic crises. And an internationally minded comparative perspective is also very important.
In this new era, when precedents are no longer valid, academia with a medium- to long-term perspective must underpin policy changes. An academic perspective that represents insights from a broad perspective and which provides guidelines on the path Japan should take and the policies it should adopt is essential at this juncture. In this sense, the importance of academia, i.e. think tanks like RIETI, which are closely related to the government, is becoming ever more important.
RIETI will actively strengthen its policy advice functions through the EBPM Center, conduct analyses that open up “new opportunities for economic and industrial policy,” and propose institutional reforms from a medium- to long-term perspective, with the ultimate goal of becoming the first policy and research institution that policy makers and industry turn to for advice and access to research results. We will strive to achieve this goal.
Saburi:
Finally, could you tell me about what made you became a researcher and about any other interests you have?
Fukao:
I became a researcher because I am not suited to being a businessman or to doing karaoke (laughs). I was rather fond of mathematics, so I thought economics would be a good fit. I don't have many outside interests; reading books, hiking and swimming in the pool are my only other passions. I guess I like sports that I can do alone (laughs).
Saburi:
Thank you very much.
July 10, 2024
>> Original text in Japanese
