Growth Strategies Growth Strategies Growth Strategies Growth Strategies d and and Fi lC lid ti Fi lC lid ti FiscalConsolidation FiscalConsolidation in in Japan Japan Fiscal Sustainability and Growth in Japan and the EU Fiscal Sustainability and Growth in Japan and the EU EU-Japan Open Forum Friday, 30th November, 2012 Sahoko KAJI, Ph.D. Professor of economics/PCP Co ordinator Professor of economics/PCP Co-ordinator Keio University
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•• The euro took away the easy choices The euro took away the easy choices of monetary and fiscal of monetary and fiscal expansionexpansion
•• Along with the Lisbon strategy theAlong with the Lisbon strategy the•• Along with the Lisbon strategy, the Along with the Lisbon strategy, the euro was expected to encourage euro was expected to encourage structural reforms and to increase structural reforms and to increase competitiveness and productivity incompetitiveness and productivity incompetitiveness and productivity in competitiveness and productivity in all Member Statesall Member States
•• But this did not happenBut this did not happen
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Growth StrategiesGrowth Strategies
•• Since the euro crisis, Member States Since the euro crisis, Member States hit b th i i d tihit b th i i d tihit by the crisis are conducting hit by the crisis are conducting structural reforms that are structural reforms that are unprecedented in terms of both speed unprecedented in terms of both speed and rangeand rangeand rangeand range
•• Had these reforms taken place earlier, Had these reforms taken place earlier, t i th ldt i th ldasymmetry in the euro area would asymmetry in the euro area would
have gone down and the crisis could have gone down and the crisis could gghave been avoidedhave been avoided
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Growth StrategiesGrowth Strategies
•• The Japanese might think Europe is The Japanese might think Europe is i i di b ll Ji i di b ll Jexperiencing disaster, but actually Japan experiencing disaster, but actually Japan
is in a worse positionis in a worse positionpp•• At least in Europe, there are structural At least in Europe, there are structural reforms conditionality sense of crisisreforms conditionality sense of crisisreforms, conditionality, sense of crisis, reforms, conditionality, sense of crisis, none of which exists in Japannone of which exists in Japan
•• The Japanese still think they have the The Japanese still think they have the choice to count on monetary and fiscalchoice to count on monetary and fiscalchoice to count on monetary and fiscal choice to count on monetary and fiscal expansion, to avoid painful reformsexpansion, to avoid painful reforms
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Growth StrategiesGrowth Strategies
So the Europeans are actually much better So the Europeans are actually much better off than the Japanese at least they areoff than the Japanese at least they areoff than the Japanese, at least they are off than the Japanese, at least they are moving forward with moving forward with •• Six Pack (including the MacroeconomicSix Pack (including the Macroeconomic•• Six Pack (including the Macroeconomic Six Pack (including the Macroeconomic Imbalance Procedure)Imbalance Procedure)
•• TSCG (including the fiscal compact)TSCG (including the fiscal compact)•• TSCG (including the fiscal compact)TSCG (including the fiscal compact)•• EuroplusEuroplus PactPact•• Two PackTwo Pack•• European Banking UnionEuropean Banking Unionp gp g•• Euro Area Common Budget …Euro Area Common Budget …
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Growth StrategiesGrowth Strategies
•• Japan should not rely on monetary and Japan should not rely on monetary and fi l li ifi l li ifiscal policiesfiscal policies
•• Instead, it needs to take bold reforms so Instead, it needs to take bold reforms so I stead, it eeds to take bo d e o s soI stead, it eeds to take bo d e o s sothat potential demand becomes that potential demand becomes effective demandeffective demandeffective demandeffective demand
•• If not, supply>demand means deflationIf not, supply>demand means deflationpp ypp y•• Governance overhaul is needed in Governance overhaul is needed in Japan too so that support for structuralJapan too so that support for structuralJapan too, so that support for structural Japan too, so that support for structural reform will be reflected in policyreform will be reflected in policy