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As I will be discussing in my next Japan Times column due out next week, one of the things that the LDP has been good at during this election cycle has been controlling the agenda. By diverting attention away from contentious constitutional reform by talking about economic reform (or at least the promise of it), Abe and Co. have used imagery of loosing “three arrows” (monetary easing and fiscal stimulus, then eventually structural reforms). The Economist (London) on June 15 wondered if “Abenomics” had “failed before it even properly began“.
As Debito.org and others have been saying for years now, you can’t have sustained growth without a healthy and energetic workforce, especially as society ages, pensioners crowd out taxpayers, and public works continue to fill in the gaps and crowd out entrepreneurship. And if you want youth, energy, and entrepreneurialism, you cannot beat immigration and the Can-Do Make-Do Spirit of the Immigrant.
But the strong xenophobic tendencies of the LDP and the dominant fringes within the ruling side of Japan’s politics have made this currently politically untenable. And here’s the Wall Street Journal giving us their take on why a serious immigration policy should have been one of the GOJ’s “arrows”. Arudou Debito
Mr. Abe’s Missing Arrow
The absence of immigration reform from Abenomics bespeaks a deeper problem.
By JOSEPH STERNBERG
WSJ BUSINESS ASIA June 26, 2013
If there’s one reform that’s symbolic of Prime Minister Shinzo Abe’s eponymous program to rejuvenate the Japanese economy, it’s immigration.
By importing new consumers and workers, immigration is crucial to stimulating domestic capital investment by companies. By expanding the taxpaying population base, it improves the government’s fiscal position. Immigration will facilitate foreign direct investment, boosting productivity.
All of that makes immigration reform precisely the kind of bold and deep change Mr. Abe promises. But the thing that makes immigration reform most emblematic of Abenomics is that despite its importance to Japan’s future, it is almost entirely absent from the agenda.
No one should underestimate the economic damage done by the country’s demographic emergency. Deaths have outnumbered births since 2005, and now that the inflow of expatriates is slowing, the net population has contracted for two years in a row. The age distribution skews ever older. As of 2010, Japan already had the lowest proportions of its population in the 0-14 years and working-age 15-64 years brackets of any developed economy, at 13.2% and 63.8% respectively. By 2050, those age cohorts will have shrunk further, to 9.7% and 51.5%, according to Statistics Bureau estimates.
Fewer people means fewer consumers. This is one of several interconnected explanations for why Japanese companies are so reluctant to invest at home. It also means fewer workers. One implication is that unless Japan could radically increase productivity per worker—by as much as 3% or 4% per year, an unusual level for a fully developed economy—it will be impossible to deliver the sustained 2% GDP growth Mr. Abe has promised.
IMAGE: Softbank Corp President—and third-generation immigrant— Masayoshi Son.
Yet Abenomics only hints at these realities, never quite facing them head-on. Mr. Abe’s emphasis on boosting the embarrassingly low female labor force participation rate is an acknowledgment that Japan needs more workers. But that is only a temporary measure in light of inexorable demographic change, which policy makers seem to forget affects women as much as men.
Japan needs as many as 10 million immigrants by 2050 to offset natural population decline, according to Hidenori Sakanaka of the Japan Immigration Policy Institute. Many of Mr. Abe’s other goals ultimately depend on immigration. For instance, unanswered in Mr. Abe’s plan to open thousands of new child-care centers so that mothers can return to their careers is the question of who will staff them. Immigrants are the most plausible solution.
Abenomics is not entirely silent on immigration. Mr. Abe proposes revising the points system used to evaluate the visa applications of high-skilled immigrants to make it easier for them to enter, and also to reduce to three years from five the amount of time a foreigner must live in Japan before qualifying for permanent residency.
Both of these would be useful changes, but don’t represent the bigger conceptual leap Japan needs to make. Tokyo can’t afford human resources “winner picking” any more than it can afford to continue the industrial winner picking of yore. Since immigration imports entrepreneurial talent, immigrants also will be vital to achieving the productivity growth Japan needs.
Successful entrepreneurs, like successful business ideas, pop up where and when a bureaucrat least expects them. Masayoshi Son, founder of SoftBank and one of Japan’s most successful living entrepreneurs, is the grandson of otherwise unremarkable pig-farming illegal immigrants from Korea. Japan needs to cast as wide a net as possible for more families like that.
The problem, of course, is that immigration will be hugely disruptive to Japan’s way of life, which is undeniably comfortable. Per capita GDP, especially when adjusted for falling prices, is healthy, thank you very much, despite anemic growth in the economy overall. Unemployment is low, even if an inefficient labor market and low productivity suppress wages. Crime is practically unheard of.
The social stability Japanese prize is not noticeable in high-immigration developed economies such as the U.S. or Western Europe. Hearing a foreigner from a place where Latin American drug cartels are active or unassimilated Muslim immigrants burn cars in the suburbs argue for more immigration, the Japanese not unreasonably say, “You must be kidding.” In theory, Japan may have no alternative to immigration if it wants to return to sustained growth. In reality, you’re asking people to upend their society in pursuit of an abstract economic goal.
Investors have lately panned Abenomics, rightly, for its lack of daring. Optimists hope this is a political calculation that a month before a major election is no time to introduce bold reforms, and that more and better is on the way later. But reflection on the immigration problem raises a different prospect. Any meaningful reform will be deeply disruptive—whether in terms of new immigrants let in, small farms consolidated and old farmers retired, new businesses started and old firms bankrupted. In all the hubbub about Abenomics, everyone forgot to ask whether Japan really wants the upheaval needed to restart growth. Unless and until Japanese are willing to tolerate such changes, Abenomics will be more wish than reality.
Mr. Sternberg edits the Business Asia column.