1. In 2018, Japan’s average rate of unemployment was incredibly low at 2.4%. I believe this figure reflects Japan’s labor shortages, which have resulted from a rapid decline in the country’s population. The current rate of unemployment is surmised to be within the scope of the rate of natural unemployment, and thus we are technically in a state of full employment. On the other hand, between 2016 and 2018, the yearly average rate of the rise in prices, excluding those of perishable foods, was -0.3 to 1%, with prices remaining stable.

Given the above, one could say that Japan has already achieved what you stipulate in your work – that the best domestic policy is to pursue full employment and price stability – and therefore I do not believe it is necessary to implement the aggressive financial policy advocated by Modern Monetary Theory that increases the currency supply. What are your thoughts on this?

2. Between 2009 and 2019, the rate of dependence on government bonds of Japan’s national finances (general account budget) was very high at 51.5 to 32.1 percent. Given these financial circumstances, I believe issuing more government bonds to further boost the economy, and pursuing aggressive fiscal stimulation, may lead to inflation.  Hypothetically, if we set the inflation target to 2%, and the rate of inflation exceeds this target, I believe that based on the state of national finances, which is characterized by everlasting dependence on government bonds, it will be difficult to quickly reduce the issuance of government bonds, leading to a situation in which inflation cannot be easily controlled.  Therefore, given the circumstances of Japan’s public finances, the fundamental condition that would allow aggressive fiscal stimulation via Modern Monetary Theory is missing. What are your thoughts on this matter? 

3. In relation to the above, do you think a perspective that encompasses both 1 and 2 would lead to a different conclusion?


1. 日本においては,失業率が2018年平均で2.4%と極めて低い水準にあります。これは急激な人口減少の過程にある日本において労働力不足が顕在化したものと考えられます。現在の失業率は,一般に言われる自然失業率の範囲内と推測され,事実上の完全雇用状態にあるものと考えられます。一方で,生鮮食料品を除く物価上昇率は2016~2018年(各年平均)は-0.3~1%で推移しており,物価は安定しております。


2. 日本の国家財政(一般会計予算)における国債依存度は,2009年~2019年において,51.5~32.1%を占めており,極めて高い状況です。このような財政事情下において,さらに景気浮揚のために国債増発を行い,積極的財政出動を行うことを実行した場合,インフレが生じる恐れがあると考えられます。仮にインフレ・ターゲットを2%に置いたとして,これを越えるインフレ率となった場合においても,その恒常的な国債依存財政体質からして,国債発行を緊急に縮小することは困難と考えられ,その場合インフレをコントロールすることが困難となる可能性があるものと思料いたしております。したがって,日本の財政状況に鑑みれば,MMTによる積極的財政出動をなしうる基礎的条件を欠くものとも考えられますがいかがでしょうか。

3. 以上について,1,2を総合した観点から異なる結論は導かれるのでしょうか。



Thank you for your questions. 

I do know that unemployment as measured is low, and that inflation on average is just above zero. Growth of GDP is low, dragged down largely by low consumption growth. I want to emphasize that I do not support "growth for growth's sake"--what matters is providing decent living standards for all. I am not sure that Japan's growth rate is too low, on average, to accomplish that. This is a matter for Japan to determine. I know, however, that unemployment measures can be very misleading as those who involuntarily leave the labor force are not necessarily counted. The conventional view outside Japan is that this has become a problem for older male workers, and perhaps for some other groups. That would add to the numbers to create a "shrinking labor force".

I did not fully understand your points about the deficit and debt. With a very low interest rate on government debt, spending is low--although with a high debt ratio that can offset the benefits of the low rate. Government spending on interest can be quite "inefficient" in that it does not stimulate further spending on consumption and investment--so does not produce growth. However, as I argue in the attached paper, there are two paths to high deficit ratios in Japan. Faster growth could lower the deficit ratios and reduce the issue of debt. The path to faster growth is targeted spending (not on interest, but in areas to increase growth). I will talk about this when I visit Japan from October 10.











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