- Japanese Prime Minister Kishida Fumio has called for a new form of liberal democratic capitalism.
- Fumio argues that unfettered state capitalism has led to widening income gaps and social tensions.
- Japan will invest heavily in green technologies, digitalization and human capital.
The Japanese Prime Minister has an ambitious economic plan that could usher in a “new form of capitalism”.
At the World Economic Forum’s virtual Davos Agenda 2022 event, Japanese Prime Minister Kishida Fumio on Tuesday called for a new form of liberal democratic capitalism that values communication between government and workers. in the first line. In a special address to business, government and civil society leaders, Fumio announced its intention to do so by transforming the Japanese economy with investments in green technology, digitalization and human capital.
“One of the main goals of my administration will be the revitalization of Japan through a new form of capitalism,” Fumio said.
Japan faces many economic challenges, including climate change, social transformation, widening income gaps and rising poverty levels, in part due to economic policies put in place by a former prime minister. Fumio’s plan addresses economic growth through green energy, technology and equality.
“Democracy is in crisis due to shrinking middle classes and unforeseen emerging tensions in geopolitics and geoeconomics,” he said. Here is his vision of a “revitalized” Japan.
Plans to lead the green tech revolution
In Japan, nominal wages increased by only 1.2% between 2012 and 2020, while the average wealth of a typical Japanese household fell by 3.5% between 2014 and 2019. In 2020 alone, Japan’s 50 richest households saw their collective wealth soar 48% to $249 billion. .
The division can in part be attributed to the economic stimulus brought about by Abenomics, a set of economic policies under former Japanese Prime Minister Shinzo Abe. The policies have failed to increase household wealth, according to Shigeto Nagai, head of Japanese economics at Oxford Economics. In his address on Tuesday, Fumio stressed that the time had finally come for “historic economic and social transformations”.
“There has been an overreliance on competition and self-regulation to limit the excesses of market forces,” Fumio said. “That has to change.”
On his list of changes is a plan for Japan to lead the world in green transformation. Fumio says that in the next few years, the country will more than double its investment in green technologies. It will also introduce a new carbon pricing system that will aim to reduce greenhouse gas emissions and continue Japan’s efforts to become a carbon emissions trading hub for Asia.
Japan is the fifth largest carbon emitter in the world. In 2021, after receiving pressure from several environmental groups and European countries, the government pledged to reduce emissions by 46% by 2030. energy are likely to help achieve this goal.
Along with investments in green energy, Fumio says another area of concern for Japan’s economic and social reform is its approach to digitalization. “While Japan has traditionally lagged behind in digital adoption, COVID-19 has given Japan a chance to leap forward in its digitization efforts,” he said. To support this, the Japanese government will invest heavily in next-generation networks, optical fiber and 5G-related infrastructure, which will reach 90% of the population over two years.
Investment in human capital
Fumio also has big plans for the people of the country, as it will encourage companies to be more transparent about their practices in order to stimulate investment in human capital. The data show that education systems and labor markets are important sources of variations in economic outcomes and that greater investment could support economic growth. “Investment in people is often seen as a cost, but it is a source of medium to long-term business value,” Kumo said.
As Fumio sets out to lead Japan into the future, the world will be watching. Its focus on green technologies, digitalization and human capital could introduce a new frontier in what the World Economic Forum calls the fourth industrial revolution.
“The capabilities of the Fourth Industrial Revolution are opening up new possibilities and opportunities,” said Klaus Schwab, Founder and Executive Chairman of the World Economic Forum. “The future will be much greener, more digital and human-centric.”