On January 24, 2025 an online lecture event was held, sponsored by Friends of UTokyo with support from UTokyo alumni associations including Satsuki-kai America, New York Ichokai, Chicago Akamonkai, Washington DC Area U-Tokyo Alumni Network, San Francisco Akamon-kai, Seattle Alumni Association, and the FUTI Alumni Association. The lecture presenter, Dr. Takatoshi Ito, Professor of International and Public Affairs at Columbia University’s School of International and Public Affairs, focused on four major factors that affect the Japanese economy: Demography, Debts, Deglobalization, and Decarbonization. (Please visit his website https://t-ito.jp/ for his publications, papers, prizes and bio.) Professor Ito began with the issue of demography, where the average life expectancy in Japan continues to rise and the population is aging, while the birth rate continues to decline. This results in a decreasing workforce, a decline in household savings and potential economic growth, and a reduced demand for consumption and investment, while the stress on social security increases to pay for pensions, medical care, and nursing care. To illustrate the rate at which the workforce is shrinking, the ratio of working-age people supporting the elderly in 1965 was 9.1 working-age people to one elderly person, whereas in 2005 there were only 3.1 working-age people to one elderly person, and in 2017 only 2 working-age people to one elderly person. At this rate, there will only be 1.2 working-age people to one elderly person by 2050. Notably, while there was a secondary baby boom when post-WWII baby boomers had children of their own, a third baby boom did not occur. The second issue is debt expansion and low fiscal sustainability. The Japanese government has experienced increased fiscal deficits since 1991, as expenditures continued to rise while income tax revenue decreased. There were spikes in deficit-financing bond issuances at key moments such as the bankruptcy of Yamaichi Securities in 1997 and the 2008 Global Financial Crisis, with a most significant increase during the Coronavirus Pandemic when government expenditure went up dramatically. The Japanese government debt-to-GDP ratio is currently at 260%, the highest among the G7 countries. With an increased risk of a fiscal crisis and/or hyper-inflation and an increase in interest payments on Japanese Government Bonds leading to less fiscal space for expenditures, an increased tax burden will be placed on the younger generation. The third issue is deglobalization. The tariffs imposed by President Trump have led to a stagnation of world trade, resulting in a major challenge for Japanese companies with a large export market to the US. There is an increased cost in rebuilding supply chains to circumvent the tariffs, and although trade with the Global South will likely increase, increased trade with China will depend on industry conditions and the state of the US-China trade relations. The fourth issue is decarbonization. The US withdrawal from the Paris Agreement led to the loss of global momentum for decarbonization, and although China is still part of the Paris Agreement its carbon emissions continue to increase. Efforts were made to curb Japan’s greenhouse gas emissions with the Kyoto Protocol, but there was an increase after the 2011 Tōhoku earthquake and Fukushima nuclear accident. However, from 2013 onwards and in accordance with the Paris Agreement, CO2 emissions have been declining. In terms of electric vehicle adoption, Scandinavian countries lead the world with Norway at 93%, while Japan’s rate of adoption remains low at 3.6%. Additionally, Japan’s use of renewable energy is still quite low, with a large dependency on coal. The second part of the lecture covered the impact of the second Trump administration followed by a discussion of questions that were submitted by the audience prior to the event. Professor Ito began by noting a common belief that tariff hikes are used by President Trump as a bargaining chip in negotiations and will not ultimately be imposed, as was the case with Trump 1.0[EW1] . By contrast, the lecturer observed that with the administration’s emphasis on the establishment of an “External Revenue Service” and the importance of tariffs as a source of revenue, there is a possibility that many of the tariffs may actually be implemented this time. Professor Ito next turned to the question of the impact on Japan if there is a 10% tariff imposed on Japan and exports to the US plummet. The lecturer observed that there is a possibility that Japan’s export industry may lower export prices to secure export volume and continue to produce in Japan. In such case, although export companies may see a decline in profits, if the yen continues to weaken and the US dollar continues to strengthen their profits expressed in yen may not experience a large decline. Dr. Ito described a third commonly cited scenario where raising tariffs result in higher prices in the US, leading to the Fed raising interest rates to curb inflation, the US dollar appreciating, US exports becoming stagnant due to retaliatory tariffs from other countries, the US deficit not decreasing, and the US economy worsening and entering stagflation. Professor Ito noted that in such case there is a possibility that President Trump may criticize other countries for continuing to export despite the tariffs and pressure trading countries to make their currencies stronger. Another commonly cited scenario described by Professor Ito was that Trump 2.0 will maintain a tough stance against China by imposing a 60% tariff and getting China to increase imports from the US, while building an anti-China containment network with allies to prevent advanced technology from reaching China and limiting Chinese investment in the US due to security concerns. Professor Ito noted that another view is that President Trump may not necessarily see China as a threat, as witnessed by his efforts to suspend the ban on TikTok, and may be aiming to cement his legacy by making a historical deal with President Xi Jinping. On the other hand, a 60% tariff on China and a 10% to 25% tariff on allies could lead to US isolation. A Q&A session and discussion followed, with audience members discussing a…
Read more