"The Japanese economy has recovered much quicker than we expected,” said Dr. Motoshige Itoh during his speech at Kennesaw State University on Friday. "The important thing is the response to industry.”
Dr. Itoh is a professor of International Economics at the University of Tokyo and the current president of the National Institute of Research Advancement. Dr. Itoh gave a lecture on the aftermath of the March Tohoku earthquake and tsunami, entitled “The Japanese Economy After the Earthquake: Its Impact and the Road to Recovery," at KSU’S Burruss Building. The presentation was sponsored by The ICA Institute, the International Center for Innovation in Technology and the Coles College of Business.
“March 11 is a very important time for Japan, with the great earthquake and tsunami, and more importantly, the nuclear plant, [causing] a serious effect to the society,” Dr. Itoh. “Japan has changed a lot, in many respects, but today, I can only speak to the economic side of this change.”
“Unfortunately, our politics have not been in the best shape for the last five years,” Dr. Itoh said. His lecture came just hours after the announcement that Japanese Prime Minister Naota Kan had resigned from office.
“I often say to my family, ‘OK, so maybe our politics are in the worst direction, so the only direction we can expect is to go in a better direction,’” Dr. Itoh commented. “The same thing [goes for] the economy. If there are a lot of [negatives] from the earthquake, at the same time, it provides us with a very important wake-up call.”
Dr. Itoh’s lecture examined the state of the Japanese economy before and after the March 2011 disaster. He spoke about how deflation affected the Japanese markets, which Itoh said was a major influence on how the national government and industry viewed spending. “Japanese consumers were actually accumulating,” Dr. Itoh said. “The reason is very simple; they didn’t spend.”
Dr. Itoh said that the ultimate consequence of the disaster was a possible end to ten years of deflationary economics in Japan, due in large part to reconstruction demand.
“The problem is the shortage of electricity,” Dr. Itoh said. “The Fukshima plant had many problems, but you have to remember, we have some other nuclear power plants that are much more affected by the tsunami and earthquake, but they are still functioning very well.”
“If you have some kind of interview with the Japanese people, over 70 percent of the people would be against the use of nuclear power,” stated Dr. Itoh. “There is going to be a very serious, long-lasting debate in Japan about how much we should depend on nuclear plants.”
Dr. Itoh said that Japan’s economic future is likely going to be dependent on an emerging Asian market.
“After 20 years of deflation, and very timid behavior, [Japanese companies] are moving toward more aggressive overseas investment, and more aggressive international activity and more aggressive reform,” said Dr. Itoh. He briefly spoke about a number of mergers and acquisitions that could have major implications on the global market, stating that a potential merger between Hitachi and Mitsubishi Heavy Industries could create a company “bigger than G.E.”
Dr. Itoh said that he believes Japan will continue to be a major international player due to the production of specialized electronics, such as computer chips. He also said that he believed that Japan will have increased trade with China, noting the emergence of unorthodox industries such as “medicine tourism” in his homeland as an indicator of changing international relations.
“If you look at the data, of course our government budget is in very serious condition,” Dr. Itoh said.
“If you look at the data of the market, U.S. government bond interest rates are two percent, but our government bonds are only one percent. You know why? If you have very strong politicians coming into power, it is very easy to reform your government budget.”
Dr. Itoh concluded his lecture by speaking about tax policies and reform issues in Japan, calling healthcare “the most important” fiscal reform item in the nation.
“I know that pension is also very important, but pension is more of a political problem.“ said Dr. Itoh.
“Medical systems are very complicated. In the United States, they’re paying 16 to 18 percent of the GDP on medical services, so it’s very expensive. But, Japan is only spending eight percent.”
“The cost in New York, or the cost maybe in Atlanta, is about ten times as much as it is in Japan,” said Dr. Itoh.
“Just remember,” Itoh joked. “We live longer than you.”
Dr. Itoh returned to the issue of the March 2011 disaster in his final remarks, reiterating the significance of the tsunami and earthquake to Japan’s current economy.
“The pessimistic picture is that we have a lot of problems,” Dr. Itoh said. “The optimistic picture is we have a very strong wake-up call, so we can either wake up or not.”