 Okay, now let me start the economic session. I'm Ipe Fujiwara of the Australian University and the KO University. So after long years of neglect, Japanese economy has now some global attentions. And we have observed some changes in the Japanese economy and also no changes are told in the Japanese economy. So this update is a great chance to discuss the current state of the Japanese economy. And we are really fortunate to be able to have about three distinguished researchers on the Japanese economy. Professor David Weinstein from Columbia University and from the United States. And a professor, Jenny Cobes of the Australian National University, naturally from Australia. And a professor, Masahiko Takeda of the Hitotsubashi University from Japan. So we have a global view on the Japanese economy. And also being very busy with the vice chancellor job at the Australian National University, Jenny still maintains her position at the University of Oxford, in particular at the Nissan Institute of the Japanese Studies. So we can cover the views from US, Europe, Australia, and Japan. So it's really great, great opportunity. So let me briefly introduce the speakers. David is Carl Sharpe, professor of the Japanese economy and the director of the research at the Center of Japanese Economy and the business of Columbia University. The Center on Japanese Economy and the business of Columbia University is the world's leading research center on the Japanese economy. And also, David is very well known as the leading academic economist in the field of economics trade with many great academic publications in top academic journals. And Jenny, as you know, the leading researcher on the Japanese economy in Australia. Before taking the job of the vice chancellor, Jenny was the director of the Australian Japan Research Center. Also, Jenny has been the main central economist, has been the main economist at the Nissan Institute of the Japanese Studies of the University of Oxford. So now we have the top economist of the Columbia, CJEB, and top economist at the Nissan Institute of the Japanese Studies. And also, we have a Shiro Armstrong of the top economist at the Australian Japan Research Center. We can have the views from the world, the top three institutions on the Japanese economy today. So I hope you'll contribute something. And Masahiko is the professor of Hitotsubashi University in Tokyo, one of the best universities in Japan, which focuses on the social sciences. Before taking his position, Masahiko was the deputy director of the Asian Pacific Department of the International Monetary Fund. And I heard that he was also the mission chief for Australia in the IMS article for consultation. Also, therefore, several of the participants may have met or discussed with Masahiko in the IMS consultation. If you don't like the IMS consultation, it may be a nice idea to talk with Masahiko, not in this session after the session. And we have a perfect person discuss the current Japanese economic issues from Japanese as well as international point of views. So OK, I would like to stop here. And regarding the other of the presentations, we would like to start with David, then Jenny, and finally Masahiko. So could you start, David? So please join me welcoming the speakers. Thank you very much for that kind introduction. It is a real honor to be here. And I am always very impressed with Australia's commitment to studying Japan and the depth of the capacity at AJRC and at ANU in Japan in social science. It's really one of the premier institutes in the world. So it's a great honor for me to be here and have a chance to talk with you a little bit. So I want to talk a bit about Abinomics 2.0, which is the reboot of Abinomics. And I thought that one of those start points for just thinking about Abe as a politician and as a policymaker is the political economy that I think underpins his leadership. What I'm showing you is the cabinet approval ratings over the last several years. And you can see Abin's has initially started very high and then it declined over time. But there's a little bit of a pattern to what has happened. So as he came in, he had a series of new economic proposals, his three arrows, monetary, fiscal, and structural reforms. And his popularity shot up. It then declined a bit. He then appointed Korota to the Bank of Japan. It shot up. And then there were several downturns that occurred related to various political issues, in particular security, cabinet reshuffles, and information secrecy. And then most recently, as he signed the TPP agreement, it bounced back up to about 46%. But I didn't have time to update this chart. And you can kind of see that part of what moves Abin's popularity is success in economic matters. And then he then spends that capital on various political issues. And I would expect that that is going to continue. So before we get into what I think the future is going to hold, I think it's worth talking about what happened in the first two years. Obviously, there was a big change in monetary policy in Japan. I think it was a success. If you look at the period prior to Abin's assuming the prime ministership, the CPI was hovering around minus 0.5% a year. And I think it makes sense to focus on the CPI, ex-food and energy, because those are not prices that Japan can really control very well. And now it's hovering around 0.8%. And I think that this period of deflation is likely to have ended. In addition, there was a fairly substantial depreciation of the yen from 80 to 120. So that's kind of comparable to what's happened in the Australian dollar. And as a result of this, although we haven't seen a lot of movement in exports, although I'll give some explanation for that in a moment, we have been seeing tremendous current account surpluses and things like tourism going through the roof. So tourist receipts have more than tripled to 3.5 trillion yen. So just to give a sense of how big that is, Japan's GDP is around 500 trillion yen. So this is almost about a half a percent growth in Japanese GDP, just due to tourism having just changed planes and not data. You can see the shops are just full of Chinese buying things. And the other piece of this is that the Bank of Japan through its policies buying about 90% of all JGBs being issued at this point. So just huge monetary interventions occurring. The fiscal policy has been a little more mixed. We've seen some tax increases that have led to recessions. And the deficits have definitely continued and are likely to be there for a while. We've seen structural reform. And as I think about structural reform, there are reasons to be optimistic and reasons to be pessimistic. To some extent, being an American looking at the world through the lens of our broken political system, what seems to be happening in Japan is amazing. These reforms are being implemented like grease lightning. We're seeing TPP coming into play. We're seeing tax reforms. We're seeing corporate governance reforms. We're seeing privatization. We're seeing energy market deregulation. So we're seeing a lot, but like in any democracy, it's hard to change things. So if you think about how big have the reforms been relative to what I would like to do if I were Shogun of Japan or following this morning's presentation, if I were the Nara-era emperor of Japan, I'd like to see Japan doing a heck of a lot more. But as a democracy that has to struggle through the different political interests, I think it is pretty impressive, the set of things that have been changing in Japan. So on September 8th, Abe announced round two. And so what I want to spend the rest of my time on is what I think is going to happen. And not spend too much time on what I think should happen, which is interesting to me, but not to anyone else. So monetary policy. I think the headline CPI, including food and energy, has been low, but I think it's gonna rise. There's been a historic drop in oil prices. Over the last two years, oil fell from $117 a barrel to 42. And that's been dragging down Japanese inflation, but that's gonna come to an end. When oil prices stabilize, I think that headline inflation is probably gonna go up by another 0.7%. And I think that there's a reasonable chance that Japan's gonna hit the 2% target next year. There were some big challenges coming down the pike. One is the China shock. What is going to happen in China? Is it gonna get stuck in a middle income trap or not? Certainly one of the drags on Japanese exports has been the slow growth in China and the slowdown in China. It's very hard to know what's going on in China. I'm not sure I trust the numbers coming out of the government. In fact, I probably don't. Second challenge that's likely to be that Japan may face is American concerns over the low yen. We've heard some statements from Janet Yellen about this and potentially there could be some pressure from the United States on Japan if the yen depreciates further. Europe shock potentially, I think there's gonna be bad news coming out of Europe at some point. They seem to be dealing with the crisis much like the Japanese dealt with the bad loan crisis, essentially kicking the can down the road so you get these temporary bailouts that rescue the situation for a couple, for a year or two and then it's gonna come back. The other thing that's gonna be an issue that potentially could create problems for the Bank of Japan is a potential JGB shortage and I'll get to the reasons for that in a moment, but I was having lunch with Governor Karoda and it really surprised me when he was talking about the concerns that they have that they're just gonna run out of JGBs and part of the reason for that is many of the people holding these JGBs are legally required to hold the JGBs and this explains why it's gonna be very difficult for the Bank of Japan to continue their policies further or continue their policies further or institute a negative interest rate because if the only people holding the JGBs are the people who are required to hold the JGBs, these kinds of policies act like a lump sum tax on various financial institutions. The fiscal situation, I have to say I have been much more sanguine about the fiscal situation than almost everyone but I also feel relatively good that over the last 15 or 20 years when I've been thinking about this we still haven't seen that fiscal crisis that people keep saying is just about to happen. So here's my very quick reason for why I don't think we're gonna see a fiscal crisis like we've seen in other countries happen. So the headline number that everyone holds in their minds is gross debt of Japan which is at 240% but gross debt is just the liability side of the balance sheet so you could say well Donald Trump is not a rich person because he has a lot of debt, there's a lot of borrowing to finance his investments. What usually you care about is the net debt so this is financial liabilities, less financial assets and the Japanese government holds enormous amounts of financial assets, many of them US treasuries. So if you look at the net debt it's 126 now you'll notice or some of you may know that that number has actually fallen why because the yen has depreciated and when the yen depreciates they get big gains on their trillion dollars of US treasuries that they're holding. Then if you look at the bank you consolidate in the central bank balance sheet you get the BOJ is holding about 68% of GDP so you say well what share of the Japanese debt is kind of or net position of the, what is the net position of the government relative to the private sector? It's only about 58% of GDP which is kind of not, it's not a very big number so what does it mean if you're gonna have a crisis? So suppose people start to get worried about Japanese government debt, well I could imagine a crisis occurring in which you had some inflation and people start to lose if you're holding dollars or if you're holding some of these JGBs. It's hard to believe that Japan with 58% of GDP, the net position of 58% of GDP couldn't raise taxes and deal with any kind of hedge fund or other entity trying to bring down or bring down the Japanese government. So I think the bottom line is that Japan is not Greece, it's not gonna look like Greece. The Japanese VAT is 8%, the European norm is 25%. There is a lot of potential for raising these taxes. Again if this were the United States with a broken political system where it's very hard to raise taxes I might be more nervous but Japan has raised taxes again and again they did it in 2004, they did it under Abe, they're planning to do another 2%. For better or worse the Japanese public has an enormous capacity for pain and so they will, in any kind of crisis you could see VATs going up much more so than you saw in Greece. The other big factor that makes Japan not Greece is that Japan has a floating exchange rate which we've seen the Japanese government able to influence and effectively the Japanese can depreciate the yen and whenever they do that that renders Japanese workers, Japanese firms much more competitive and also improves the fiscal situation of the Japanese government because they get these big capital gains. So I can certainly see a scenarios in which you have some inflation, I can see some scenarios in which you have some depreciation and tax increases and expenditure cuts but I don't see a crisis and indeed kind of if you do surveys of Japanese and you ask them what would you like either a 34% VAT, a 16% VAT and a 35% Social Security benefit cut or a 10% VAT and a 47% benefit cut, you get a lot of Japanese going with option two and I think that probably if I had to do a forecast of what's gonna happen I think it's not gonna be a Greek style crisis, it's gonna look like an increase in the VAT and a cut in the benefits and probably the way the benefits will be cut is the way that they're cut in most democracies which is you raise the retirement age, you change the indexing rule and so on and so forth. So if you're a 30 year old Japanese person you certainly have reason to worry that your benefits are not gonna rise or be as big as you might initially have thought but I don't see a crisis. Structural reform, so this is by far the hardest thing that Abe is trying to deal with and as we heard earlier, one of the fundamental problems with Japanese growth rates is declining population so just some basic numbers, the number of men over age 15 in the labor force has fallen from 85% in 1960 to 70% today and women have declined a little less. Abe has been targeting raising the fertility rate, that's a hard thing to do. There are some reasons to believe that it might rise a bit but I think Japan's gonna be a long way away from zero population growth for the foreseeable future. One of the impacts of this obviously are on growth rates and social security and we certainly know that the Japan system is overloaded which again means that either you're gonna have to raise taxes or you're gonna have to cut benefits and I think both are coming down the pike. Second issue has to do with secular stagnation, there's been some very interesting recent work done on this, on how population declines interact with deflation. One of the big questions if you're an economist is why is it that this deflation has continued for so long and we usually think about monetary phenomenon as short run types of issues, we've seen Japan stagnating for a very long time. I think one of the big problems that Japan faces is that you have a lot of people who are anticipating retiring, you don't have that many young people so you have all these people saving money and you have very few people who are able to invest in new projects and things like that because the economy is shrinking and so in order to get people to consume you need to have very low interest rates because low interest rates boost investment and they also make it cheaper essentially to consume now versus to consume in the future. The problem is that Japan's hit the lower bound so they can't really lower interest rates unless they get some inflation and that would drive real interest rates negative and I think that that's one of the fundamental problems that's been driving this secular stagnation that we've seen in Japan over the last two decades. It's also probably part of the reason why fiscal discipline is so recessionary in Japan. We keep hearing about the notion that what Japan just needs to do is raise taxes and if you raise taxes that will be the solution to restore confidence but in 97 and then a year ago when they raised taxes what happened was you went into very deep recessions and part of the reason for that is is when they're raising the taxes it's cutting down consumption and the problem is a lack of aggregate demand. So in order to get around this you need some labor market solutions. Immigration would be a solution. I know Abe would like to push Japan in that direction but I think any major political reform any major reform is politically infeasible. I don't even think it's really worth spending a lot of time on. It's just it's the third rail of Japanese politics. You'll see small influxes of foreign workers come into Japan with great fanfare but nothing major happening. In terms of other types of labor market reforms you might I think there may be some things that'll do that'll have modest impacts. So I think there'll be some efforts to improve childcare facilities. I think there's some effort to increase female labor force participation although I don't have a lot of optimism for actually doing much on that. I think that Japanese women already work close to international levels and I think that it's gonna be hard to raise it and the other thing to remember is these things take decades to implement. I'm running short on time but I'm just gonna ask for just a couple extra minutes. Hopefully it's okay. One of the bigger impacts is gonna be one of the biggest things that could change things is policies that improve productivity. So raising productivity will help restore fiscal balance because when you increase GDP you tend to increase tax revenues by a little bit more and here Japan has done a number of reforms that may matter so we've heard about TPP could raise Japanese income by one to 2% but this again is gonna happen over maybe a decade. Reducing discrimination against women is not only good morally, it's also good economics because if you start hiring the best person for the job instead of the best man for the job you tend to get better workers. In the United States where we have some estimates of this raising, reducing discrimination tended to raise productivity by around 0.1 to 0.2% per year. That's not trivial and so that's something that I think Abe is definitely trying to push forward. How successful is hard to know. A lot of reforms have impacts that I think are very unclear. The corporate governance reform, I don't know if that's really gonna do much to allow two outside directors on a board versus the norm of close to zero. I don't think GPIF reform will have much of an impact on productivity, we can talk about that later. Let me just finish up with my bottom lines. So I think quantitative and qualitative easing by the Bank of Japan is gonna continue. I think there's gonna be some increase in inflation. I think that it's possible that the yen may depreciate further and again I think the mechanism for what this is going to do is it's gonna drive down real interest rates into negative territory and boost investment consumption. I think Japanese growth is likely to rise as the yen stays low. I think it also is going to have a salutary effect on wages because workers get part of the profits and profits of exporters have been quite high. I think the fiscal situation is gonna be a problematic for a while but I don't expect it to end with a bang. It's gonna end with a whimper. You're gonna see inflation and you're gonna see people stuck holding either JGBs or cash and they're just gonna lose money. We will see taxes rise, we will see benefits fall and again structural reforms, they're great. It's like exercise but you should expect them to have effect over the long run not in the one to two year timeframe. Okay, I'll stop here. Okay, thanks very much. Let's see if we go, yeah. Okay, look I'm gonna be very brief partly because I knew that the previous speaker and I'm hoping the one after we're gonna do a fantastic job of telling you what is going on in Japan and you don't need me to tell you that besides which most of the people in this room can hear me talk anytime and you can't hear these other two people talk so I'm gonna be the sandwich meat, very thin. But there were a few things that I wanted to say. Now, as you expect of course, I do have views about Arbenomics and what is going on in Japan. So happy to answer questions about that but I was asked to talk really about what the impact will be on Australia of what's going on in Japan so I just wanted to say a few general things about that and then perhaps to give you a slightly different perspective. So clearly the things that matter broadly for Australia are what happens to Japan's growth trajectory. So if David is right, we gradually see growth. That will have some knock on effects as it does to all of Japan's trading partners. The other thing that matters of course is the value of the currency. So if the end continues to depreciate, we get some competitive pressures there that will have some impact on our likely penetration into the Japanese market but our currency is probably keeping more or less pace with Japan so the relative exchange rates really what matters in that context. And the other things that will influence are really whether TPP if it is ratified has elements in it that are gonna take the relationship to the next level and I'll talk a little bit in a minute about what I mean by that. So TPP has in it really pretty small tariff gains. The amount of most of the trade that is covered by TPP is already pretty close to zero or low tariffs. So the big benefits if they come are not coming there. They're gonna come from the new elements that are in TPP around service trade, around investment agreements and around other sorts of market access if those make it through the ratification process in each country. Then I think the other thing that is important for Australia is what happens to Japan's energy policy and this would be really a session on its own and perhaps next year's update we might think about actually looking at where we are on energy because right now it's hard to tell which way Japan is going on energy. Perhaps our next speaker will say something about that but if nuclear power doesn't come back online and Japan remains more dependent on fossil energy than it was expecting to, Australia has a role to play in that but of course there is now a plethora of other sources of energy from other destinations around the world and the US shale oil, a variety of other sources coming on stream mean that the preeminence of Australian coal is not what it once was. We obviously have LNG projects underway here so all of those things are important but what I really want to talk about a bit more is not a macro perspective. So what we normally as academics are interested in is trying to understand how the Japanese economy works and what we learn about the macro economics of an economy that's facing some problems that are very similar to us and to other developed countries and some that are very different and David has given you I think a very good explanation about why Japan is so fascinating from that point of view but academic views on economies are a kind of esoteric and rather small you might even say an important element. What really matters for economies is what business does and thinks and so one of the things that I thought I could add for today is because I've just come back from Japan where I was at the Australia-Japan Business Cooperation Committee meetings with the counterpart Japan-Australia Business Cooperation Committee which brings together a big group of very influential business people in the bilateral relationship. That made me think about what are the issues that the business community is talking about with respect to the Japanese economy and in some ways they are different and to me the difference was pretty interesting. So my takeaway from that meeting and the perspective that it gave me was that there are a couple of things that businesses are concerned about which are similar to what David and I and other academic economists are interested in and those include the labor market and the outlook for wages. But there are a whole lot of other things which I thought what was interesting was that they were not on the agenda. It's the dog that doesn't bark. What is it that they are not talking about in public forums that tells you something about what they are really concerned about? So taxes, tax reform, hardly any discussion and I have a version of why that might have been. Inequality, not very much on the radar. Public debt, not very much on the radar. Immigration, not really being discussed except is you have to say something about diversity and internationalization of your workforce because that's what you have to say but actually no plans to do anything very much. What I thought was going on. What was a very big topic of discussion was political stability. So what my sense is that the Japanese business community is very relieved to see Prime Minister Abe win the next, win the LDP leadership again and they see that as more or less a guarantee unless there's some really big disaster of three more years of fairly stable political environment. They don't care very much. I mean they're realistic and can see that the chances of getting very many big economic wins in three years are not very great. That doesn't matter nearly as much as having political stability matters. Just don't change policy too much. Slowly is fine. So the labor and wages definitely is on the agenda and the reason for that is that there is a sort of curious puzzle about Japanese macroeconomy at the moment which is that although growth is picking up although unemployment is falling there is a fairly strong employment picture there is still relatively little increase in real wages and that's good news for business of course. It's not actually in a macro sense all that good news because that may mean that consumption doesn't grow but currently it does mean that businesses are not yet facing wage pressure and the consensus view I think is that that cannot actually last. This is a tight labor market in Japan. That is part of what an aging workforce means actually but if you are going to then hire a decreasing from a decreasing pool of young workers you would expect to have to pay them more. At the moment that has not happened and so that's a tipping point that businesses are watching. At what point does the labor market tightness begin to create rising wages and of course that feeds into the scenarios that David has discussed about the forecast for inflation because inflation is not only driven by monetary policy it clearly is reflecting underlying labor market conditions. So that's my take on what the business community was talking about and as I say there are a number of things they just we're not talking about taxes they are trying to dodge a tax bullet. Everybody can see that tax reform is needed in Japan. Nobody wants it to be their part of the tax spectrum and so it's just easier not to talk about this. There is a debate which David didn't talk about very much which is if you're gonna have to raise taxes which clearly you will have to do are you gonna use the consumption tax or are you gonna use income tax? What is not being discussed is are you going to reform the corporate tax system in such a way that you actually increase your tax take from the corporate sector? Now Japan at the moment has a high, on paper has high corporate taxes. Many companies in Japan like everywhere else manage to not pay their taxes one way or another so there is capacity there but the focus in the discussion is on will it be consumption tax, will it be income tax and the corporate sector is staying very diplomatically politely quiet on that subject because what they do not want is anything that actually increases the tax take from the corporate sector. Now what does that translate into? Well look there are a lot of things that I think it can translate into but one of what I wanted to draw your attention to is that I think there is some good news for Australia in the fact that Abenomics is gonna be very slow to revitalize the Japanese economy and this comes from a number of elements of the relationship. One is that actually our exports are at the moment don't seem to be terribly sensitive to minor changes in the growth rate and you can see that in this slide here and I acknowledge I've taken these slides from a very useful presentation given by Oztrade in Tokyo for the meeting that I was just at but as you can see here our export trade, our Australian commodity exports to Japan have remained remarkably steady over a period in which Japan's growth rate has changed a lot. China is overtaking but nonetheless it's the scale and steadiness of the exports to Japan that I think is striking. The other thing is that Japan remains an extremely large and growing source of foreign direct investment into Australia. Okay so we know they're number three after the US and the UK and that the value of foreign direct investment from Australia into Japan has been growing over again over a period when the Japanese economy's growth has not been steady so Japan is the third one along there and the sectoral distribution of that direct investment into Australia has been changing over time. Mining is still there and there are a number of very big and interesting mining projects on the go at the moment but food, finance and insurance, wholesale and retail, these are non-traditional sectors or they're new sectors in our relationship and they are also growing. Okay there have been some really interesting new M&A projects on the go this year between Japanese investors and Australian companies so the ones that made the headlines were the Japan Post Takeover of Toll Holdings, a logistics company, in February this year at $6.5 billion, it was a very large project and it reflected the fact that Japanese investor, Japan Post no less, saw Australia as being a hub for a network in the whole of the Asian region but there are others on the go too, recruit holdings purchase of people bank in the human resources area tells you something about the nature of the relationship, this is changing, this is about the service sector, this is about new forms of connection between the two countries. Now why do I think that this is a good news stories in the middle of Japan's basically not very good news situation and it has to do with the position of the corporate sector, okay? This graph shows you that the corporate sector has still a very large savings balance, positive saving in the corporate sector relative to other countries, okay? This is Japan is the top heavy black line on the savings balance in the corporate sector compared to the US and Europe and cash holdings are enormous relative to the corporate sector in other countries and the cash holdings picture is even clearer here, okay? Corporate sector in Japan is absolutely a wash with cash. What is it gonna do with that cash when the return on equity in Japanese firms is so low? Japanese firms are looking for places to invest and they're gonna be looking outside of Japan. So that is part of the explanation of why we're beginning to see this influx of Japanese investment into Australia in a whole range of new firms or new types of venture. Now I put this partly down to changing structure of the Japanese corporate sector and here I differ with David about, and this is my last slide if they so I'm about to wind up. I differ from David in my assessment of corporate governance reforms in Japan and how much they matter. I think they're slow and I think that they are at the moment tinkering with things that don't matter very much, having two external directors on your board. You know, it's not gonna, when the most of the board is for management inside the company and the external directors won't know anything about your business, they're not gonna make a big difference. But take a look at this graph, okay? This tells you who owns Japanese companies. Well, take a look at that dotted blue line. Foreigners now own 30% of Japanese corporate sector, okay? And insurance companies, city and regional banks, the classic old owners of Japanese companies are no longer there. Now, if you combine that change in ownership with the changes in corporate governance that are coming, not the mandated changes, but the ones that are coming because it is now possible for companies to have a different corporate governance structure and many of the big ones are opting for that different corporate governance structure, then I think you may see a different attitude, different kinds of companies and looking for different kinds of opportunities, which is why that pattern of foreign direct investment and relationship with Australia is gonna change in response. That's where I'll stop. Thank you very much, Jenny. So the final speaker is a Professor Masahiko Takei. Thank you, Professor Fujiwara. And it is my great pleasure and honor to be here to speak to you. I'm glad that I'm the third speaker because the previous two speakers have done a great job in summarizing what the binomics has been and also pointing out a number of very interesting and important issues. So I will limit myself to sort of express my assessment and maybe express some of the points that I not fully agree with, especially David's presentation. Anyway, let me present my assessment of a binomics upfront. I think a binomics has had a number of successes. So that's great. Mr. Abe has been very different from previous PMs who came and went almost every year leaving almost nothing behind. But Mr. Abe has left something already, has achieved something and I think that's great. But at the same time, I'm not really an optimist. I'm a pessimist because the problems Japan is facing is so big that some successes from a binomics are probably not enough to sort of turn around the sort of sinking feeling or sinking tide. So that's the sort of summary of my assessment but let me be a little bit more specific. Take a step back and think of what was the situation of the Japanese economy before binomics. It was said that Japan was suffering from six-fold handicap and some of you may recall but probably many of you don't. So let me cite those six problems. Japan was facing before a binomics. The first one was the Yen's appreciation. Second one, high corporate tax. Third one, a delay in free trade agreements. Fourth, rather tight labor regulations which were constraining the flexible labor employment. Fifth, very tight environmental regulations. And finally, power shortage. This was related to the earthquake which stopped all the nuclear power plants. Now, checking these six items, we can clearly see that some things have clearly changed. Most obviously the Yen rate has depreciated a lot. Second, I'm sure all of you know that there's been a big breakthrough in terms of trade negotiations which I'm genuinely careful in repeating if ratified, if ratified. So there's still a lot of uncertainty about that but I'm hoping that not just the direct impact of liberalized trade but also some of the approved measures can be sort of driving force in terms of, for example, modernizing agriculture, liberalizing agriculture, things like that. So this is also a plus and some actions have been taken on corporate tax not much. Some baby initial steps have been taken. Hopefully it will be followed through. And also at least some limited labor market reform has been introduced. Now the other two, environmental regulations, maybe these are okay. I mean, at least I'm personally okay. Power shortage, this has nothing to do with abenomics but some slow process is going on through which at least some of the power plants are starting to be operated. Anyway, so these are the successes and some of the successes, abenomics has achieved but the question I would like to pose is are these the only problems for Japan? And the answer is unfortunately resounding no. And at least there are two big problems to my mind. The first one actually explained very clearly by Governor Arai which is population aging, declining working population and as a result declining potential growth of Japan. So that's one big sort of structural medium term problem that we have to deal with going forward. The second one is huge public debt. And I think the success of abenomics so far has to be assessed against this backdrop. Namely, has it been successful enough? And like I said, I have to say the answer is no by a wide margin. Anyway, so let me briefly assess the three arrows of abenomics from this point of view. Number one, first arrow, monetary policy, drastic easing of monetary policy. I would say that it has had at least very big financial effects. Exchange rate has weakened and with that our share prices have risen and long-term interest rates which were already low before Governor Kuroda's QQE, but still it has declined a little bit. So financial effects have been very visible. So that is a success. But when it comes to the aggregate demand effect, which is something you normally expect from a monetary policy, it seems clear that we haven't seen a surge in aggregate demand. If anything, the consumption has been rather weak and so on. So as a result, since aggregate demand, and if you subtract aggregate supply from that, you get output gap. Changes in output gap is supposed to be one of the main drivers of inflation. And if this aggregate demand part has not been that much affected by QQE, it's sort of natural that the inflation has not picked up that much. There's another factor which is often cited, expectations and Governor Kuroda has been making sort of a big deal out of it. And this part is actually very interesting from my academic point of view and I could talk longer, but I would just state that apparently this expectation channel have been rather weak, and hence our inflation pickup has been rather limited. So this is how I see the first arrow of a minimix, but I should add maybe that actually the failure of the Bank of Japan so far to raise inflation can be a great blessing in disguise. Why? Because as long as inflation is low, the Bank of Japan can keep on buying government bonds. And as long as BOJ continues buying JGBs, the fiscal problem can be thoroughly swept under the carpet. So in fact, Mr. Kuroda's failure can be a great, I wouldn't say solution, but at least temporary remedy so that the Japan can continue and move forward without squarely looking at the problem it is facing. Okay, anyway, so that's the first arrow. Second arrow, the first consumption tax hike has been made, but the second was postponed. And I think it's unfortunate because frankly, there's no clear sort of prospect of the government being able to put its fiscal house in order. And I think David's analysis is, I mean, obviously correct in many points. I'm not too sure about his way of sort of cutting the gross debt down to eventually 58%. And there can be a lot to be said about that, but perhaps even more importantly, he said that he presented several ways of addressing this issue, and he said that 60% consumption tax plus big benefit cuts might be a realistic solution. And maybe my concern is just that, namely even a modest hike from five to eight and then to 10 requires such a huge difficulty. And also, cutting, big cut on benefits. This is going to be again hugely politically difficult. So maybe on paper, if what David suggests can be implemented, then the problem can be alleviated, but having observed the way these things are handled politically, I'm really, really pessimistic about anything major can be taken. Anything, yeah, any major action can be taken by the politicians. So that is a really main difference between me and David. On the third arrow, namely structural reforms. Here, again, the result is mixed and I think David summarized this very nicely. In my view, the only, I mean, all these, all the structural policy or growth strategy measures are useful and so they should be pursued as much as possible, but when it comes to tangible return and reasonably quick result, the only thing I can think of is changing immigration policy which was discussed in the morning earlier after Governor Rice discussed presentation as well. But usually the reaction of Japanese is always difficult. There are culture issues, et cetera. I just want to add one thing on this related to the question and answer between the audience and Governor Arai. There is a view that since regions are losing population, why not invite immigrants to local areas? But Governor Arai said that it's not just population declining, but the job shortage is in the regions. So the first step, I mean, if you introduce lots of guest workers into areas where jobs are declining, you can easily expect a disaster. So the first step is to create jobs and Governor's presentation had some of that, but the difficulty is that there's no clear and quick solution to job creation in the region, but at least one thing that sort of is hanging right in front of us, and it was all over Governor Arai's presentation, is that there is one big growing market in Japan. I mean, Japan itself is shrinking very likely, but there's one growing market in Japan which is old age care and related medical services. And the reason why these people, I mean, there's no reason why we should keep many old people in the city. Right now, they stay in the city because the hospitals are better, facilities are better, and so on, but at least conceptually, local regions should be able to, should try to invite more of older Japanese to the region. And now that requires caregivers to be available in the regions, but this can be at least partially covered by introduced foreign aid givers. So some such combination of policies that make the whole thing feasible is necessary, and if there are enough caregivers coming from abroad, actually local young Japanese can go to cities if they want to, and that still there can be enough caregivers in the region. Now, but what I hear, not my view, but I heard this from an expert, and this is related to public finance which was also asked by someone after Governor Arai's presentation. These old-age care business requires public, I mean, has to be supported by public funds naturally. And if old people move to the rural cities, what happens apparently is that first of all, they don't have income, they have retired, so they are not really attractive taxpayers for sure. On the other hand, this public responsibility to support the old-age care business, that is local government's requirement, at least partially. So from local government's point of view, it's like you invite people who don't pay tax but you have to support them using local government budget. So this expert is arguing that this kind of old-age you know, old-age related public finance system is flawed and has contains negative incentives, so something has to be changed on this front as well. And now, this may not be the critical and clear solution, but the point I want to make is that you have to combine many things, right? I mean, how to create jobs and can you combine it with immigration policy? Can you change public finance system so that there'll be an incentive? And so on and so forth, you know, the some clever way of combining different reforms to achieve a particular business model, so to speak. To help achieve a particular business model is probably required for Japan to somehow have a successful growth strategy. Okay, I stop here. Thank you very much. I think we had a really fantastic presentation and also it's nice to have a Jenny as a meat of the sandwich between two. Okay, so the, right, okay, so you have a lot of questions but do you want to, do you have any comments on the other's presentation or do you have any questions? Okay, no, David, do you have any questions? Okay, so we should have a question. So that if you have a question, could you tell your name and affiliation first? So the Warwick first. Thanks if I, I work with Kevin from the Crawford School at the ANU. Three very good presentations, very interesting. I just wanted to pick up Professor Kata's last point and contrast it with David's point. David made the point that there was no fiscal problem in Japan. We had two, well, that was the inference. We had two very distinguished Japanese presenters at the update two years ago. We have a really interesting presentation about how there was nobody left by JGBs because their stock had risen to such a level that all the required holdings had been bought and no foreigners would ever buy these bonds. Then the Bank of Japan came along and bought up all of the surpluses and it's continuing to do this. Now the worry I have is that the budget deficit last year was still running at 7.5% of GDP. And I think Professor Kata's right that 7.5% of GDP as far as the eye can see is a serious fiscal problem. My question to all of you is what's wrong with the following policy? David made the point and so did Professor Kata that each time the consumption tax increases in Japan it's followed by a recession. Now the reason that's the case was because these were one-off increases in the consumption tax. You raise the tax, you announce or the government announced they may or may not do it again because of the political backlash, they didn't do it again. So you've had consumption brought forward to avoid the tax increase before the prices went up. And then you created a hole after the policy was implemented. So why not announce a 1% increase per year from now for the next 20 years, 1% this year, 2% next year, 3% the year after? That way consumption goods in the future will be definitely more expensive than they are today. You raise inflationary expectations by at least 1%. You bring forward demand from the future to the present and you will have resources to then do serious tax reform because you cannot do corporate tax reform when you're running a budget deficit of 7.5% of GDP. It seems politically impossible. But combining the politics of tax reform in the corporate sector with the need to have inflation with the desirability of having higher consumption taxes in the mix could be a solution to Japan's problems, fiscal problems, inflation problems. And then you have to deal with I agree Professor Decatur's problem is what if Japan's inflation does rise then what does it mean for Japan? I don't do it because no one wants the whole JTBs. So the fast point so that we don't have to deal with it first? So one, now one? Yes, good, okay. So I want to be a little careful about interpretation of one of the things that I said. So I didn't say that there's no fiscal problem in Japan. What I think a better way of stating it is that I don't think there's going to be a fiscal crisis in the sense that if you're sitting in a hedge fund and you're thinking, okay, is there some way that I can, am I gonna see interest rates spike and the Japanese government unable to pay off its debt and we'll see something like Argentina, that I don't think is gonna happen. But surely they've gotta bring the budget in line and the only way that can happen is to bring up two basic strategies. One is raise taxes and one is to cut expenditures. The issue is the many ways that that can be done. It will be painful. So I think I agree with Takeda-san, it's not that Japan can do this easily, but it's gonna be painful. But I think if what, but the way that it blend is gonna be with a whimper, not a bang as I said earlier. So it's gonna be some kind of, I don't wanna use the word default, it'll be social security age being raised, it will be benefits being cut, it will be certain medical procedures no longer being covered. These are all ways in which you don't get as much as you want. Expenditures are cut without government saying we're defaulting on social security. So there is a fiscal problem, it's just not gonna turn into some sort of Latin American debt crisis. I think people who people lose a lot of money holding either government bonds or holding cash, but they're not gonna have great alternatives. I think the issue with raising taxes. I should come back later maybe. Oh, okay. That's a good question. That's a good question to all of the presenters. Okay. The question this up was really about the tax. So I wanted to talk to the tax. Okay, maybe you'll give me. Thanks. I'll try to keep it a little shorter. I think on the taxes, so certainly, one way to improve the situation is raise taxes. One of the things that we have to realize in Japan and in many, many countries that have been in structural stagnations is that the evidence is not that when you raise taxes, things get better, things seem to get worse, right? When they did it in 1997, Japan went into a massive crisis and had a banking crisis, and more recently it happened again. So this notion that raising taxes is gonna be the solution has a problem, at least certainly in the short run. And I think the problem is that it reduces demand, and Japan has insufficient demand at this point. And I think that we need to think about mechanisms that will deal with this fundamental problem of a declining labor force, and so that's why I was saying, monetary policy inflation is what Japan needs. They need a little bit of inflation, or taxes. Good point, all right. I actually agree with you, Warwick. Is that? I'm not sure if it's on. It's on. It's on when you agree with me. Absolutely. The only thing is that you're not the first person to suggest it. And in fact, Hamada at Yale suggested it before the previous round of tax raising, instead of doing one big hit, just go gently. I don't know the full story about why that was rejected. I understand it was something to do with the internal politics in the Ministry of Finance, which is even depressing if that's true, but because I think it makes sense. And then it's not so much about tax revenue. It is again about changing incentives to consume now or save, and it makes a lot of sense. The other thing I think that's important is that if a credible tax and spend package is perceived to be coming, not instantly introduced, then that changes the risk attached to JGBs. They then become a different kind of asset. If you can make JGBs into a low-risk, high-quality liquid asset, then other people, including foreign institutions, will buy them because globally, we actually have a shortage of high-quality liquid assets. The Australian banking system is crying out for that kind of asset because the new regulations require you to hold them and we have no government debt in Australia. So I think that there are many benefits that can come from looking like you have a critical strategy here that gives you a soft landing and not compartmental. All right. Warwick's point is that why not increase consumption tax one percent per year over the next 10 years, say? And I think there's absolutely no problem or is that itself solves a number of problems? So I have no objection. But the realistic problem is that even a one-shot tax increase is so difficult and how can you make politicians, I mean, force politicians to make commitments to, I mean, it's not really a commitment to do that, but you put it in the law, right? So that over the next 10 years, consumption tax keeps on increasing by all together. The percentage point, that is just way so difficult. And we can see that from the recent decision to postpone the tax hike. And here again, I have a sort of different way of looking at the reaction of the economy after the first consumption tax hike on April last year. Many economists, especially market economists and analysts, were taken by surprise because many of them thought that this negative impact will dissipate pretty soon. But it didn't. And that was one big reason why Prime Minister decided to postpone the second hike. But I would say, at least in hindsight, given the 3% real income decline effectively, it's not really a surprise that our consumption will remain weak for a sustained period of time. I think the basically tax increase is costly, but the situation, if there's a strong sense that the current situation is unsustainable, I think politicians need to apply the bill and give it up, including the second hike. But it didn't happen. In that sense, it was very unfortunate that many apparently had a too optimistic view about consumption after the tax increase. So may I join you about the gradual increase in consumption tax or impact? I'm not the presenter. But what I heard is that this is not the global opinion but maybe huge administration cost. Because you need to increase consumption every year so that when I heard that there must be a huge administrative cost. So I don't know about that. I don't want to work in a tax agency where the consumption increase. Right, so I would like to have a question, so please. Yeah. Hi, I'm Hal Hill from ANU. David, hi. Question to you, extra presentation things. I wanted to draw you out a little bit and I was really talking with some of the options. So the migration option seems to be difficult. The pension reform option seems to be difficult. The employment, changing employment practices seems to be difficult. Maybe it's repotization is going to be the solution. I'd like to draw you out a little bit more. One other point, and I see this, is that the new minister has got responsibility for increasing the fertility rate. He's in the newspaper every day. This is in Japan last week, he seems to be every day. Is it possible there's a bit more happening on the migration front than we realize? I was just talking to some industrialists who's in a forum involving Japan and Southeast Asia and they said there's quite a lot happening under the radar screen and that they really liked the fact that they're getting a lot of workers, in this particular case, from Indonesia and the Philippines, a lot of it unrecorded and a lot of it's semi-formal permanent. And they said it's much better than having Japanese workers, sense a bit like Australia in migration, too, I guess. Yeah, so it's always hard to know how much is going on under the radar. I think that there certainly is some influx and I think Japanese are divided on the issue. Immigration is probably the single best way that Japan has for getting out of its problem. I mean, so just to give you a sense of some of this impact, right? So it's well known that the American educational system stinks by international standards and the Japanese do way, way better in math and science. So then you can ask yourself, well, how come Americans do so well in high tech when we're all so ignorant about math and science? And the answer is that if you look at our IT workforce, about half of them were born abroad. So Americans are hiring the best and the brightest internationally, we may not be that smart, but we know how to hire people who are. And so Japanese have a huge disadvantage because if you're just hiring the smartest male worker for your job, you've only got about 60 million people to work with out of a world of seven billion. So that's a disadvantage. I think, again, I think we'll see some influxes and foreigners, but it will never be anything like what exists in Australia or Canada or the United States where 15, 20% of the population is born, born. Japanese seem very unwilling to let in any significant number of foreigners, so maybe we'll see 1% to 1%, but I'd be surprised if it goes beyond that. Even though I think it's a good idea. A proposal for the Japanese economy, which I haven't really heard discussed very much which helps perhaps to make immigration more palatable. And that is that there's talk about increasing inward foreign investment into Japan. But what that typically is thought to me is bringing in some foreign policy into Japanese firms. And as we've seen, that's beginning to happen. But we used to hear about hollowing out of industry in Japan as being a terrible thing. The Japanese manufacturing was moving offshore to build in China in places where labor was... So if you can actually encourage foreign firms to come in and set up in Japan, bring field sites or take over old brownfield, but actually come in, hold me foreign, bring your workforce, locate in the regions, Governor Nara might think about this, you bring them in and they bring their own workforce and they commit to looking after that workforce. And that makes it politically much more attractive in Japan because the concern is that they won't fit in, they'll leave welfare and all the rest of it. So, and you have permission to do this for say a 10 year life of a project. And then at the beginning, the expectation would be the workers would go home and in reality half of them will probably stay but by then they'll be assimilated into Japan. Now a program that really targeted that and said we're going all out to bring foreign firms to do manufacturing, high tech preferably with their workforce in the regions, you would be winning always round. I haven't ever heard anybody suggest this, somebody must have, but that would be my way of going. I think what the person who asked the question saw is, or heard is so-called skill training program or internship program or something like that. It is, I understand, it's being done and many Japanese firms are really dependent on them but it's presumably not official immigrant workers but it's an internship program and as such there are many restrictions imposed on that. Another source of foreign labor is actually students coming to Japan for study. But I think they are allowed to do a part time job 20 hours a week or something like that and I'm sure this isn't restricted enforced. So, if you go to say a Chinese restaurant, many of the waiters and waitresses don't speak native Japanese and I'm always tempted to ask them, which university do you study? So, the point is, de facto, we are already importing a lot of foreign workers, maybe not that lot but a considerable number of foreign workers but the political decision to officially recognize the reality and make it legal and that sort of process is very difficult for us. I could have a further question so maybe first, Shiro, please. Hi, Shiro Armstrong from the ANU. Thanks to the panel for a really interesting set of presentations and discussion so far. Just thinking about Japan's problem of having the demographic problem shrinking in age and population, I didn't hear too much from the panel on lifting productivity and sort of supply side response. There's a lot of it focused on sort of magic bullet structural reforms or getting the macro settings right and what's been done so far on the microeconomic or structural reforms is a lot that people spoke about. The theme I'd characterize as politically easy so maybe you disagree. In mandating 30% of managers have to be women and things that sort of flick of a switch without fighting the domestic political battles that I think I believe you need to be able to make markets more contestable. The only difficult thing really has been to keep the people first notified and that's an agenda really set externally to Japan and some bits will help, no doubt. And this comes back to David's point of sort of downplaying structural reforms or obviously the benefits will take time to be seen and it's not clear what some of the reforms will do. And Jenny's saying that business was talking about stability and slow is fine. I guess my question is, can Japanese incomes buy in huge immigration all of a sudden? Can Japanese incomes be maintained and even grow without these difficult political reforms with domestic level burden? This time, maybe, shall we? With the reverse order? Yeah, so that maybe, because you're always defending so that maybe this time, maybe start with Masahiko. I think actually David had a slide on productivity and I broadly agreed with these assessments. Some can work, others are not likely to produce a lot. But so overall, I think there's no much one can expect in terms of total factor productivity going forward. But the problem is that the government estimates are counting on, say, 2% total factor productivity growth going forward to make public finance ends meet and that is as high as the rapid growth period in Japan. And nobody knows where that much of total factor productivity growth is coming. So that's another concern about fiscal sustainability. But if you look at the situation differently, even without total factor productivity, Japanese, individual Japanese will not be getting poorer. If you look at the total GDP growth number, that has to shrink as population declined. So sorry, this isn't really a solution to get a more accurate picture. Japan's aggregate GDP should be presented along with per capita GDP just to see how happier or not happier Japanese are. Thank you. I think that last point is very important and it's one that I would also make. But even though average output per head and the income could be maintained with slower growth and declining population, distribution effects are non-truly. And it might be that that becomes more important than what the average looks like because we know actually that the Japan's performance of poverty and relative poverty is now looking pretty poor, pretty bad compared to OECD. And the big part of the poorer section of the population are the elderly, so that becomes an issue. How you improve that without some growth is difficult. So there was another point I was going to make, which I have now, momentarily forgotten, and I'll come back to it if I remember. David. Thanks. Oops. No. Okay. So I'm coming at Japan, and I just watched the second Republican debate, and I was listening to Jeff Bush, who's the most reasonable, maybe, of the Republican candidates, argue that the key to his vision for US success was doubling the US growth rate. And Paul Krugman correctly noted that he would, he should have just said triple it, or optimistically said quadruple it. So I think there's, you know, raising productivity growth is a wonderful thing. You know, I'd like to be smarter too. It's hard to implement. However, for Japan, right, the way, the right way I think to think about this is that there are many, many ways in which we can improve our growth rates, but not many ways that we can do it that will produce big gains. And I think that, given that immigration is off the table, for the most part, there's one thing that Japan can do that can really have a big impact, and that is reduce discrimination against women. You know, you look at Japanese managers, and you see that only 10% of them are women, as opposed to 30 to 40% in most other countries, and that's telling you that a huge share of your labor force is being underutilized, and they're being put into jobs that are not particularly, that don't make full use of their talents. It's very hard to push this forward, because if you ask most men in Japan, are you discriminated against women, they will say, no. But yet, you have this result. And I think that the way forward is to do things that are, you know, the US would call it affirmative action, which is what Abe is doing, which is basically saying to Japanese government ministries, I'm sorry, you've got a higher 30% women this year. And don't tell me that you can't find good candidates. You have to find the candidates. And I think that that changes the equilibrium in which people are used to seeing just men in all these positions, but it's gonna take a long time. So I think he's got the right instincts. I think he's pushing in the right direction. I think it will, you know, we look back, if it continues for 20 years, we'll look back on this just like Americans look back on discriminatory periods in their history, and we'll go, I can't believe that was the state of the world, but it's not gonna happen overnight. It'll be a slow and hard process. I absolutely agree with that point, and I think also my thinking with my corporate governance point earlier, we had a presentation at the conference that I've just been at by a remarkable woman who is on board with a number of wisdom Japanese companies who pointed out that up until about 2005, there were two women directors in the entire listed corporate sector. It now risen to the fabulous number of 17, but it's hard to believe there aren't some more pretty fabulous women out there in front of those jobs. But the point I was gonna make that I forgot before was about the special economic zones. So one of the pieces of the structural reform program that is sort of creeping forward, more or less unnoticed, that is doing things, and I don't know a lot of detail about them, but I think this is an area to watch is where the special economic zones, the kind of companies that are thriving in those, and perhaps if we have time at Buickstein to hear from Governor Arai about whether those sort of programs help in the regional revitalization strategy, are they really useful, or do they just look good on paper? Okay, we are a bit of the running out, what's the part of you like to talk about maybe sort of one, two, three, so please go first and please your question, make your question quick. Hi, Angus Nicholson, IG Markets. I was just wondering, we've seen machine orders now decline for three months consecutively in a row, industrial productions on a multi-month decline, Japanese third quarter GEP is looking like we're heading into a technical recession. Given all that, how does the Bank of Japan not increase the QQE stimulus at its October meeting and then how much capacity is there going forward to further stimulate, we're already running out of the Japanese government bond market, they're gonna start buying provincial government bonds and how much more can they do to really support and keep easing as we go forward if the economy's still doing so poorly? Yeah, okay, so please. Yeah, hi, my name is Vibhore, I'm a masters of higher student. The ease of business rankings for Japan is 29th for 2014, but there is a subcomponent in that ranking which says ease of the starting of business of which Japan's ranking is a decimal 83, which shows that there is a lack of startup culture in Japan as compared to Israel or Silicon Valley. So do you think, I mean, providing a stimulus to the startup culture in Japan, it might fuel the economics and is the economics 2.0 addressing that issue? Thank you. This is Carol Lawson from the ANU PhD student in Japanese law and previously Nogawa University graduate school of law. Why, this is more of a comment about affirmative action under ergonomics. My understanding is that the new targets are purely voluntary for private sector and there's been negligible even appalling uptake. So it may be unnecessarily unrealistically sanguine to think of that as being likely to create any change in the private sector in my lifetime, at least in Japan. Okay, so maybe who would like to go first? Maybe this time, Jenny, are you ready or not? I might just pick up that question about business startups because that certainly is still, there is evidence that this is genuinely difficult in Japan and it hasn't really got a lot better. And it is partly about the regulatory structure and it's partly about a lack of venture capital type of financing for small businesses. All you can say is that there certainly is reference made to this problem in economics 2.0, but there are no concrete strategies policies yet announced as about how to fix that. On the other hand, there are a large number of small businesses in Japan. So somehow or other, despite the difficulties, small startups do exist and they last longer. They are longer lived than in other countries. So I think part of the difficulty is around rapid exit. Try something fail, try something new is where the difficulty is in the entrepreneurship culture in Japan. Okay, so very quickly. I think on the question of recession, so I think you're right, there may be another recession coming up. Whether that's, it's hard to measure kind of the state of the Japanese economy right now because on the one hand, as you mentioned, we've got these declines in production. On the other hand, the labor market is incredibly tight with unemployment and free point something percent. And I think the BOJ is just gonna have a very hard time doing a lot more liberalization or sorry, a lot more stimulus. But I think probably, and one might argue that one of the major reasons for this decline has to do with external factors, and slowing the Chinese economy rather than things that the BOJ can control directly. Regarding the startup of a business, one of the problems Japanese companies face has to do with labor market loss. And in particular, it is very hard for companies to lay off workers. And ostensibly, those laws are designed to protect workers. And certainly, if your company is going down, you may think that a law like that is good news. But whenever you have structural change, one of the problems is that the losers know exactly who they are, but the winners don't know who they are. You can think about structural change in Japan or structural change in the United States. Part of the reason that we were able to have a tech boom in the United States is because we didn't tie up all of our labor in inefficient car companies. And by letting those companies shed workers, that ultimately creates the talent for the other types of businesses. Apple Computer, for example, used to be a manufacturing company. It is no longer a manufacturing company. It is a wholesale retail company. Now, you could say, well, you know, on the one hand, we have the decline of manufacturing, right, you can cry about that, but what you got was Apple Computer. I think on net we're doing better, but it's two sides of the same coin. Japan, you know, I think Abe knows that labor market reforms are an important element in creating the workforces that would be used in startups, but it is politically very difficult to implement reforms that will enable Japanese companies to shed workers in response to shocks. Let me just say one last thing about the comment about women. You're absolutely right, I mean, that a lot of the reforms are courtatory, they are reforms, some of the reforms are not, in terms of the workers, the women workers in the government that he does control. I think what he's trying to do is try to lead by example and say, look, I can do this in my ministries, I can do this when I appoint cabinet positions and things like this. And the hope is that by, you know, him appointing women, that starts to have some other impacts, but it's gonna be a tough slot. It's, you know, you look at the battles in, again, in my country, dealing with racism, dealing with women, it's not, there's no magic bullet and it's gonna be a lot of small measures and hopefully that will push things forward, but you're right to be upset that things are not moving fast enough, absolutely. All right, all right, first, do you think it's possible easing? Obviously, I don't know, you know, it's up to the recorder, but given the Bank of Japan's modus operandi so far, they may have to take an action. He may have to take an action, but as I already explained in my presentation, I don't believe that, you know, it will have any visible impact on certain aggregate demand. There might be some additional financial impact if foreign investors who seem to be looking for another action to come use that as an opportunity to adjust their portfolios or take a position and then that might have a financial impact, but frankly, I don't think that is the main thing right now. It is the main thing for you, obviously, but from my point of view, you know, it's almost like a sideshow when it comes to its impact on aggregate demand inflation and so forth. Second, ease of starting business, my sense is that I'm sure there are difficulties, some difficulties, but I don't think Japan's case is particularly bad or anything. It's more like mindset of Japanese, especially young Japanese. They are not really used to going it alone, taking a chance to something that others don't do, and that is what I feel by giving my limited interaction with Japanese students. I'm mostly dealing with foreign students, so my knowledge is rather limited, but maybe Professor Fujiwara has a view on that. We are running out of time, so I'd like to close this economic section, but luckily the presenters will join the lunch, so that if you have any questions or comments, please contact with them individually. So that, okay, so please join me thanking our three fantastic speakers for this question.