 Okay, let me now start the economy panel. I'm Ipe Fujiwara, professor of macroeconomics at the ANU here and the KO University in Tokyo. So weather is fantastic and it's a little bit unfortunate we don't have any windows. So I wish we could do economy panel outside. And the cherry blossom is growing. Is it cherry blossom? Yeah, so I hope some of you can enjoy Hanami twice this year. Okay, so let me start the economy panel. So we are really fortunate to have two distinguished speakers in this panel, Professor Mariko Sakakibara, UCLA Anderson School of Management, and Dr. Takashi Kouzu, vice president of RICO Company and the president of RICO Institute of Sustainability and the Business. Let me introduce the first speaker. So Professor Mariko Sakakibara is one of the most respected economic economists from Japan. She received the BA and MA in architectural engineering from Kyoto University and the University of Tokyo, respectively, and then joined the Ministry of International Trade and Industry. She studied at Herbert as a Fulbright scholar and received a PhD in business economics from Herbert. Since then, Mariko has been at the UCLA Anderson School. Her main research interests are alliances, innovation and the technological change, intellectual property rights, multinational corporate strategy and national competitiveness. And Mariko has published her research in leading scholarly journals, including American Economic Review, Run Journal of Economics, Journal of Economic Perspective, Journal of Industrial Economics, Review of Economics and the statistics, so that I think we can continue forever and we can run out of time just introducing her publications. So let me stop here. And a note of this is also a co-author with Michael Porter and the Hirotaka Takeichi of the book, Can Japan Compete? So which was selected as one of the books of the year in 2000 by the Economist magazine and which has a lot to say Japan as of now. Okay, then let me introduce the second speaker. The second speaker, Dr. Takashiko is known as expert on the Japanese macroeconomic issue. Takash has deep knowledge of various economic issues such as the financial system, monetary and fiscal policy and aging, namely almost all the important issues in macroeconomics in Japan. Before joining RICO in 2010, he worked for the Bank of Japan from 1980 where he was advisor to the governor for parliamentary affairs and the public relations and also for international affairs as to banking regulations. And he was a member of the Basel Committee on Banking Supervision from 2006 to 2010. Actually, when I was young, I had the privilege to work under his director, Shippata Bank of Japan. So he is the best of us I have ever had in my life. Although I admit I tend to say this whenever I introduce my former boss any time. But having said that, honestly, I think it was really fortunate to be able to work under both encourages, challenges and passing something innovative as to be able to work in such circumstances is a rare, rare opportunity. So I was really lucky. And Takashi recently published a book at the moment only available in Japanese, Misunderstandings in Deflationary Economy. I hope you have a book, but you don't have a book. And I'm not quite sure whether my translation is right, but he has written a really fantastic book about comprehensive view about the macroeconomy in Japan for the last three decades. I really hope that this could be published in English in the future. So without a further ado, we would like to start the economics panel. And please join me in welcoming the first speaker, Professor Mariko Sakakibara. And you see, I'm teaching at the business school, so I have to move around when I speak. So coming from the warm sunny California, it's a little bit chilly here in Canberra, but nonetheless, I'm really enjoying my stay here. So I'm gonna talk about the Japanese labor market. So I'm gonna start from some macro view showing some macro statistics and what's going on behind the Japanese labor market. And I wanna focus on some issues about the microstructure of the Japanese labor market. And specifically focusing on the friction choice and conclude with some recommendations. For this audience, this would be very familiar figure. So this is a Japanese population structure. Each bar is a population and for each age. And back in 1950, it looks like a pyramid structure. It's a typical to any developing countries, a bunch of babies are born and they die over time and unfortunately, you know, so this blue part is working as a population. So they're only supporting a very tiny portion of the population. Then this is like 2020 so currently and including a one year forecast. So at the bottom of the pyramid you saw in the previous slide it's now coming the orange age, right? So this is the bottom pyramid and the working population, that blue part, so big but now on top, the aged people. Forecast to 2040, so now it looks like a mushroom cloud, right? It's something exploded, I guess, the population bomb exploded. So this is the working population now. It's shrinking and the babies are shrinking even farther and on top, there are huge aging population here. So this is a proportion of elderly population by countries, so comparison among major countries from 1950s to this is including a forecast up to the 2060. So Japan started as kind of young population country, most rapidly aging and this vertical line is right now. So Japan is already, about 30% of the population is over 50, 65 years old and most aging population and if you continue to be so and if you look at the top three aging population, country, Japan, Germany, Italy, I guess that's something common during the World War II but I'm not getting into that, okay? So okay, so the unemployment rate, this is over the last 10 years or so, again picked up by some major countries, Japan is a red line. So the unemployment rate is low and getting even lower and lower. That's consistent with pictures that the working age population is shrinking. Oh, I put Australia here, so it's a blue line, kind of stable I think and United States, this is the black line kind of unemployment rate is declined. Okay, so it's clearly, we can expect and actually true that there's excess demand. This is a graph plotting the job opening to job applicants ratio. So for every each job applicant, there are 1.5 job openings. So this is the seller's market and increasingly saw in the more later years. So this deep is like a great depression time. So what we can see from this is that clearly there is excess demand. Demand is greater than supply in the labor market. So labor market is one of the markets just like a product market or financial market, this is a market. So if the demand is greater than supply, that economics one-on-one, right? So what's gonna happen? What should happen? So the price has to go up so that in the labor market wage would increase or the people can switch jobs for better opportunities or the supply side would increase because people can see the opportunity and perhaps influence all in workers. Let's see what happened. So the wages. This is a wage gross comparison between US, the Euro area and Japan. There are three bars. So the blue bar is from 1995 to 2007, green bar is 2008 to 2017, red bar is most recent including one projection and the overall message is very clear. So Japan's bars are lower. That means wage growth is much, much slower than US or the Euro area. And Japan's for the first two bars are under the lost decades or lost two decades, whatever. And so the wage is not increasing at all. But even recent wage growth that is pretty much still right behind all other major economies. So I showed that there is excess demandable labor that the previous blue line we saw and but labor turnover rates that is defined as the number of job people who joined the company or the left companies divided by the number of employees. Surprisingly, even though the workers demanded increasing labor turnover ratio is pretty stable. People are not moving around to seek better opportunities. Percentage of foreign labor force that is Ms. Kamikawa's keynote speech. So this is Japan looking at from the over the last 10 years or so. The percentage of foreign labor force is a little bit above 1% which is not really, a little bit, tiny bit increase but not too much. And it's way lower than any other major countries whose data can take. And you get 10% USA, 15% and even Korea, South Korea here, it's 2% higher than Japan. So what's going on? So I want to point out, of course, many reasons but I want to focus on two issues. The first is the friction in the labor market. For any market to function, there has to be free flow of people, free flow of information. But something is, there are many obstacles that prevents from the free flow in the Japanese market. The first one I wanna talk about is a rigid hiring process. So it used to be the lifetime employment was a norm even though lifetime employment was limited to the male workers, working for big companies, maybe primarily manufacturing. So that wasn't a big proportion of all the workers but it's even more shrinking. Nowadays, young people when they join the company after graduation from the college, they don't expect to stay in that company or they're not sure if that company would exist for the next 10 years or so. And still, however, the hiring process is pretty rigid. So what happens is that, okay, there is an agreement by the member companies of K-downlands at the Federation of Economic Organizations that is a big company's organization. So they agreed that they're gonna start recruiting new college graduate on March 1st of their third year that is the end of the college student's third year. So this is what happens on March 1st. So all the college students go to the company line up and to hear the information session and you can tell that everybody almost wearing the same suits, same color, even the same hairstyle, it's unbelievable. Okay, so this very rigid hiring system, so it's typically still in Japanese companies tend to hire a bunch right after the people graduate from college and they train internally even though that structure is not sustainable. And this rule to start recruiting on March 1st is going to be abandoned I think next recruiting year but then by the K-downland but then Japanese government said, wait, you know, you guys have to keep that rule. I have no idea why the other administration is saying that. Okay, so, and even after people joined the companies the mobility is restricted. And one of the, so when people join the company they can develop their own skills and there are two types of skills or human capital. One is the firm specific human capital that is if you work for Sony or Toyota you learn the Sony way, right? And then versus you can develop industry specific human capital, that is a knowledge that can be transferable to if you go move to your current employer's competitor. And so if people are talented and learn quickly, you know, valuable skills they should get the opportunity outside of the current employer. But that prevents is a non-compete contract. So what's non-compete contract? So that is a post-employment restraint that prohibits workers from going to the current employer's competitor or start their own company, competing company for the certain amount of time in a certain area in a certain activity. In the case of the United States it's typically like two years restriction maybe typically in the same state and the same thing as you are doing at the parent firm. So why does that exist? Why do people sign non-compete contracts when they are hired? So if people can freely move then the company has less incentive to develop their knowledge, the human capital in the company. So the knowledge creation will be hindered. So the non-compete contract is a way to restore the incentives of company to invest into human capital. So other means would be there but it's costly to implement. Okay, so it's prevalent in the United States. The enforcement of non-compete varies by state. For example, in California there's no enforcement of non-compete. So you can go to any competitor in California versus in Florida. So even if you are fired then if you have signed non-compete you cannot go to the competitors. So very strict enforcement in Florida and all other states are somewhere in between. And in Japan non-compete contracts exist and there's no official statistics available about the recent effort to gather information, some surveys are going on and the preliminary results shows that in Japan non-compete contracts are as prevalent as in the United States. I did a little bit research on the effect of non-compete using the US data. And what we found is that in the state of which strictly enforced non-compete contract spin-out formation is a law. Spin-out means that a group of people in a parent firm have some business idea and leave the parent firm and start their own firm. That's a spin-out. And that formation is law in the strictly enforcing states. And in those states skilled workers tend to stay in the same position and moreover their wage is suppressed. So the clearly non-compete works to restrict the mobility, restrict the wage, a lot of negative issues. Okay. So in Japan, even entertainers cannot move. Okay. So the entertainer, the left hand, right hand, she is a very popular TV star and she wanted to have some independence and her agency said no. And now she cannot even use, she was using her birth name to be an actor and now she cannot even use her name because her name belongs to the previous agency. Okay. And this is the most very popular Japanese boys band and they are doing the boys band for 25 years and now they got in the fall deal. They cannot keep doing the boys band. Okay. So they want to be independent. They wanted to leave their agency. And agency said, yeah, you can, but eventually those three people left and but the agency has such a power over TV station to staff their entertainers. So they cannot even show up on the TV. Okay. So the, even those people have individual talent, they cannot really move. All right. So the second issue is a limited career choice. Okay. It sounds like working for a company is not such a good idea. Okay. And what about starting your own company? It's very limited in Japan. But comparing the US and Japan, in the US, the number of people who are running or working for the companies who is younger than 3.5 years, 14% for the United States versus 4% in the US. The number of startups way, way, way lower in Japan. How about venture capital investment? So venture investment, $3 billion. But if you take the ratio of the venture investment to the total market cap, Japan is the lowest among those countries. Okay. So this is a survey taken from the 54 countries. So there are college students who are business and management major. And are you gonna be entrepreneurs five years from graduation? And the top, very highest countries, Peru, Panama, et cetera. So the 65 to 67% of the people say, yeah, I want to be an entrepreneur in five years. They're typically, you know, emerging economy. So perhaps the existing jobs are not that attractive. I put Australia, I found Australian people more entrepreneurial than I initially thought. So about half of the people think that they wanna start their own company in five years. Okay. Japan, among 54 countries, the bottom, right? So only 14% of the business major said I want to be an entrepreneur in five years after graduation. Okay. So the alternative to be an entrepreneur is a gig economy, freelancers. That's gig economy like Uber driver. So instead of starting your own company, you can work on your pace whenever you want to work and even you have some, you know, day job and start working after work. And the study shows those people typically have some other job and Uber people tend to drive like a Friday night or a weekend. However, the work pattern varies by week. So they work whenever they want to work. If you go to Japan, open up your Uber app. Call for Uber car. A taxi shows up, okay? I'm not kidding. Because Uber is restricted in Japan. The only way Uber can work in Japan is to have an alliance with taxi companies so that taxi people can keep their jobs. Okay. So, okay. So all of them indicates some restriction on the labor mobility or flexibility. So I recommend that in terms of, you know, initial hiring to internal training model doesn't work anymore. And so the year-round hiring at any level would be recommended. Limit enforcement and non-compete contracts. We have to let people move freely for the better opportunities and allow the development of gig economy like Uber lift and on the job training at the college level so that college kids can be exposed more to what kind of opportunities they have to develop their career. Thank you very much. Thank you. I think Prime Minister Abe agrees with me. Thank you very much. I would like to, in the first place, thank you for your pay. Introducing me to much exaggeration, I should say. My name is Takashi Kozu. I'm from Tokyo and I just can't make kind of an entertaining fashion of my presentation so I stand still here as many Japanese do. And I'm going to, I'm kind of a person who is doing more like market economy job so my presentation will be more general and I'm going to pick up a couple of issues here today. Let's, the current issue, let's look at this table. This is the short history of China, US trade dispute and this friction cast a shadow on Japan's economy. It's an external matter and if you look at the right hand side, Japanese yen is appreciating against the dollar because the trade friction all over the world hits a US dollar and make it weak. That means stronger yen and stronger yen does harm on Japanese exporters and therefore that will cast a shadow on the equity prices in Japan. If you see the level of the equity price index, it's the green one, comparatively lower if you compare it with other countries, equity price indexes. And also domestically in Japan, consumption tax hike is scheduled in coming October and this is the estimation of growth rate made by major economists in Tokyo and on average they expect negative growth rates in the fourth quota of this year. Although the government is planning to expenditure the almost whole amount which they observe through the tax hike but yet the economists see that the economy will be weakened. This is the domestic factor of uncertainty and because of these two uncertainties, I think the Japanese equity prices already show the weakness and also the manufacturing sector here shows a sign of desolation already. And looking at Japan's economy in more longer term I think Japan's economy is quite vulnerable against these types of demand shocks. The reason for that is this one. Generally speaking on the right hand side, economies is always changing when you see things in the longer term, 20, 30 years of time. Demand changes and supply side generally trying to catch up with that change on the demand side but in Japan's case externally Japan has to cope with the changes of its environment because up until 80s Japan just didn't have to compete with China for example and you may realize that when you go major cities on the globe and then see the TV sets 10, 15 years ago all those, many of all the TV sets are coming from Japanese manufacturers. Now I presume outside Japan almost none, almost everything is coming from Korea for example. So that is the fundamental changes, well the competition environment has been changed greatly for Japanese manufacturers and domestically as Sakagibura sensei mentioned it's the demographics in Japan, aging society and aging society means the components of the demand changing slowly but dramatically. Those who stayed in Japan for a while find that there are many ceremony holds for wedding in many cities but today they are changing for holds for funeral. That's one of the thing that aging society means and new demands are born in the area of elderly care or medical care but these fields are restricted. I mean regulations are stronger in these areas and because of that regulation the price mechanism just doesn't balance the demand and supply. Thus Japan's economy always having problem with changing its supply side structure always and that force is quite strong for Japan's economy. And when you look at the price changes this is year to year price changes of many several price indices you can tell that sometimes Japan's economy gets into deflation but it comes back to normal slight inflation and then coming back to deflation again. This is what I call repeated mild deflation and it's quite strange that if you read economics textbook that always we assume that price mechanism smoothly balance demand and supply but in Japan's case more than 20 years of time demand and supply seems not stably balanced. I think it's because of all those shocks from the globalization or demographics developments and that's what I wrote my book last day in Japanese. I didn't think I have to bring it one because it is written in Japanese and for the undergraduate students so but I send one copy to Shiro so probably if you have interested in that book please ask him to have a look. And on the right hand left hand side of this chart it's what we call output gap. The total demand total supply comparing which is bigger. That's the notion of this output gap. If the output gap below the zero horizontal line that means you observe excess supply or lack of demands. If above the line then it means excess demand in substance supply. All those excess supply period corresponds to the mild deflation. So demand side changing and supply side is trying to catch on catching up with that change but the supply for the old demands by the way the driver's license those who have driver's license in Japan cease to increase. So if you see less number of people who have driver's license it is no use producing automobiles for Japanese domestic people. And that means the Japanese car makers have to reduce the cars for the domestic market. So that kind of things keep on happening in Japan and therefore excess supply for the domestic market and new supply just doesn't come up because all those new markets areas are more or less more strictly regulated. And therefore Japan's economy always have excess supply and it takes time to reduce that excess supply for such a long period of time. And therefore if some demand shock comes in on to Japan's economy the price tended to go below the, I mean go down to the mild deflation. That's the reason why Japan is so valuable for such a long time to any kind of demand shock. That's kind of situation is called someone called deflation equilibrium. It's a kind of mixture of slight deflation and very low growth rate but yet the real interest rate is positive. But at the same time if you read economics textbook you can reach the same real interest rate by higher nominal growth rate and higher interest rate. So Japan somehow get into the deflation equilibrium. This is one of the stories. And this chart shows the results of the internet survey which I have been conducted with my research colleagues to the individual investors and their inflation expectations surprisingly doesn't change in the long term on the right hand side quite stable. But looking at 2018 and 19 it jumped to more than, is it more than 3%? Probably this is a recent changes of inflation expectations but I'm not quite yet sure. But anyway until 2017 the expectations of inflation didn't change at all and that is one of the reason why that kind of repeated. My inflation didn't disappear. But still I should say that Japan's economy have more difficulties. This is the macro level profitability of Japan's economy. Output price, macro out of the price versus macro input price. So as you see and probably you are not expecting this but until say 2000, middle of 2000s, 2005 around 2005 this profitability we call it terms of trade wasn't so bad even if Japan suffered from many difficulties but it worsened after that and then there is no trend of recovering. So this means Japanese farms in general are having a worsened profitability and therefore they want to raise prices but yet as I said the global competition is so hard and they just can't raise their output prices and that is not good for getting out from repeating my deflation situation. And second thing is this one. It's a bit about close to the issue which was taken by Sakagibara sensei in the previous presentation. Japan's labor market has been changing. On the left hand side it is the regular employee which is kind of fixed employment as Sakagibara sensei mentioned. Once you employed a company you just keep on working until you're retiring age. The lower range line is kind of a flexible labor. Part time or gig workers but as you see the regular employee it's more or less level off after the late 1990s but the flexible labor non regular employee is just keeps its uptrend ever since late 80s. This means the representative employee in Japan's economy, the attributes are changing. In 80s it is more the weight of fixed labor is larger. Now the weight of flexible labor is more larger but as you see on the right hand side the wage difference is so huge. This is a month's salary, prefixed month's salary without any overtime work fees. It's as you see it's two third of the wage of non regular employees is about two thirds of that of regular worker. The reason why is thanks to say word Excel PowerPoint. I think almost everyone can use all of these programs. The jobs which Japanese firms pay higher cost in say 20 years ago could be done easily by part-time workers but you can easily think that you can't ask your employer to raise your wage because you can use word Excel PowerPoint but yet your organization is paying some subscription fees to Microsoft anyway so Microsoft gets some fees but you can't get some extra wage because you can use all these new programs. So your kind of labor productivity rises obviously. The employed person who can use word Excel and the employed person who just can't use them if you compare this to labor then obviously I think it is you can presume that labor productivity is improving but yet even if that improved labor productivity you just can't have higher wages. That's the world we are living in. So as the average, the attributes of labor so of average working person is changing the wage changes year to year wage changes at a given level of employment rate is lower than before. The orange line is since during the abenomics period since currently 2013. The blue lines are the whole period of time. Obviously the orange line is above sorry down below below the linear trend of all these sets of data. So if you have weak wage then that leads weaker service prices and then that will lead to well as far as the price level is concerned weaker prices. And also we are now entailing the age of robotics. This is a word used by professor, I wrote it down I should say, Richard Baldwin of the Institute of Graduate Institution of International and Development Studies in Geneva, robotics is obviously the combination of globalization and robotics. And now we are living in the age of digital transformation. As you know, you have heard of a petty clerk kind of a trend. If the average income level goes higher the demand for services increases. If you have enough foods, closures, housing then you seek more services in many kinds. So on the left hand side it's almost the service sector employee in Japan's economy, it's increasing. And we are living in the age of digital transformation. So digital services are more demanded by the consumers. But now you could rely on the programmers abroad outside Japan to make programs. I mean on the right hand side this is the international monetary funds midterm projection of the global growth. And if you see the 1980s that growth was mainly brought by the advanced economies, the blue part. But now and after the global economy is majorly, well largely supported by the advanced economies. And that means higher education, higher training in emerging economies, and therefore they are more and more good programmers abroad. That means white collar workers like programmers, they have to compete here now with the white collar workers abroad and with the help of artificial intelligence. It is more like that the level of the quality of the programmers are coming to kind of level off. Even if you're in the States, in Australia or in somewhere else, if you can use English. But even if you don't speak right English, then it is okay. AI will translate smoothly your intention into the common language. And therefore hereafter I think the white collar people, they have to compete with the emerging countries, white collar people. So that is one thing robotics means. Robotics, you can find many robots all around you now. And even in the white collar jobs, what you call robotics process, is it RPA? We call it in Japanese. Automation, yeah probably, yeah. And the designed repeated simple jobs are all replaced by the computer programs. And therefore you have to, the white collar workers have to compete with AIs, compete with robots, compete with all those white collar workers abroad. That's the age of robotics. And therefore a competition becomes harsh and then the wage in the service sector, you just can't expect the wage in the service sector. Just doesn't go up as in the past. So that's, and finally I would like to mention this thing. In order to overcome such difficulties, you often heard that the key issue is to improve productivity. But if, well this is what I did, sorry. This is what I did in the previous picture. Well, just skip the details. You just see the bottom blue line. Real wage can be decomposed into labor productivity and labor share. And if you calculate the Japanese statistics with this equation down below, then you could tell that in Japan's economy, labor productivity per employee per hour is increasing actually. But it does not, the labor share is keep on decreasing and therefore the real wage doesn't come up. And if you see that lowering real wage, that means you can't expect the transmission where higher real wage leads to strong consumption demand and then push up the growth. Then lower labor share means firms gets more. So you could expect that firm expand more investments and then that leads to higher growth. But then again, there are stories about the Gauffa firms, Google, Apple, is it? Facebook. Facebook and also what is it? Amazon, yes, and Microsoft. These are kind of a platform, digital firms. Their activities just do not lead to a higher level of activities on the whole macro economy if you compared the effects with the large manufacturers like GE or GM. They don't produce more employees. There are stories we just go to a very special, talented person and therefore even if those platform firms get more profits, then that won't lead to higher expenditure of that platform firms. David Otter, professor of MIT and his colleagues are publishing the related research papers on this issue. And if this is true, then lower labor share and higher firms earnings, but that won't lead to higher investment. If you look at the large equity buybacks by all those firms currently, they won't link with the real investment of all those firms, but the fruits will go back to their equity owners who are already rich and they want to use extra money. They get from higher equity prices. So these two things, lower real wage and lower effects of the global platform firms on macro economy. These two things combined, major advanced economies are now experiencing what they call secular stagnation. So that one story, that should be examined, but Japan is not an exception. And that's all I would like to say today, but finally I have picked up some maneuver for monetary policy and the fiscal policy. This is interest rates quite low for Japan and there's no room for maneuver to make demands stimuli through further monetary ease. And for fiscal policy, this is a very long-term simulation of debt outstanding of Japan's government against the nominal GDP. This ratio should be converged to some level if you don't believe in there's free lunches. If the government, even for the government, I don't think there's, I support the claim that there's no free lunch, free lunch. But in order to, well, the Japanese government is just showing its prediction until, say, 2025. But if you extend that simulation up until 2045, then that ratio, debt outstanding against nominal GDP will going up again to diverse in the future. And somehow, if the government debt is on that course, someday no one will buy any more Japanese government debts. So that's what we are worrying about. And finally, just mention, if there is any exit from the current unconventional monetary policy, the relationship between the inflation and the long-term rates will go back to the normal. And if that happens ever, I doubt it. Before my, you know, I don't know. But anyway, if that happens, then even if 1% inflation, the long-term rates will go up to 2%. If you see the stable 2% inflation, that the long-term rates rate may go up to 3%. Which the long-term rates currently in Japan is negative now. The negative rates go up to 2%. It's a huge shock on Japan's economy as well. So the Bank of Japan should consider to make the process very smooth. But you can't expect the financial market to make their adjustment smooth or slow. Financial markets tend to move quickly. So we have to also prepare this kind of shock in the future. That's all I would like to say. Thank you very much. I think we had a great overview about the Japanese comment from rather MicroSide and the MicroSide. Yeah, and the time is a little bit limited, but we are happy to have some questions and comments so that if you would like to ask the presenters, please raise your hand. Okay, could you start from there? You are the first and you are the second one. It would be great if you could tell your name and affiliation first. Good morning. Thank you. My name is James Krest. I'm with the A.N.U. College of Law. A question for Kozusan. Thank you for your presentation. I'm interested perhaps at the possibilities of for the Japanese economy in a response to Ondanka in the response to climate change. And if you could talk about that in terms of the opportunities in the green economy and the response to this challenge. Is it a similar question? Different question. Quite, your question is similar, different. Maybe that could be answered. Thank you very much. This is the badge for SDG's Sustainable Development Goals by the United Nations. And many Japanese big firm executives now wear this badge. I just wonder whether they truly know what this goals imply. But as you said, this is a kind of a, from economics point of view, it is more like external effects part. And that kind of a higher average temperature on the globe or the probably the fire in Amazon now is partly because of the higher average temperature because there are some research results that if you have higher research, higher average temperature, then the area, the forest area you lose by the fire, it becomes larger. And these two things correlated statistically supportive. I mean, so current corporate management just doesn't include such external costs fully. The, or more like plastic things, micro plastic things in the sea that will broke the whole balancing in the living creatures in the sea. That sort of cost will come up in coming years and then firms should spend more on those areas. That means the calculations made, for example, here today is not fully covered all those extra costs which Japanese firms will face in coming years. And so with the even lower profitability, but that profitability will burden more constraints in the future. So that we, well, I'm always telling my colleagues in my firm, we have to brace for it. So I'm saying this towards the other firms executives as well, but you're right. All those costs, possible potential costs we can't include in simulations we made now. Do you want to add something? Yeah, I just want to add that in Japan's, overall Japan's really energy efficient country over the many, many years and way back when I was working for the Japanese government the energy conservation efforts are full-fledged. And, but that also means is that Japan's already did really to push to the envelope. So the margin for the more energy conservative it's a very challenging to go even further. Okay. Thank you very much. Is it okay? Yeah, so that. Good morning, Steve George, I'm a business owner. I'm just interested in your observations about entrepreneurship in Japan. What is Japan's policies in regards to stimulating business opportunities that would see importation of businesses being created within Japan and how does that relate to the trade policies that have been recently agreed upon and how aggressive is Japan taking its position in regards to stimulating business through those particular policy mechanisms? Yeah, my understanding is that Japanese government is aware that entrepreneurship should be promoted and so the some kind of public money is going into the supporting the entrepreneurial activities but it's not just government providing money. I think it's both of the chicken and egg problem and the structure problem and to really increase the entrepreneurship you know the full education system needs to be changed so that the students are exposed to the various career paths, various possibilities. Right now as I showed in this recruiting effort, consulted effort that follows a very strict calendar that kind of narrow the mindset of the Japanese college students and that might be also contributing to the very limited career choice and so it's about not just providing money and many things that discussed is that okay, perhaps the exit strategy is limited in Japan and but I recently learned that to take a company public, you know a small company to take public, it's not that restrictive in Japan, there's a market like mothers and you can do it. The problem would be not just going to the IPO but another issue is that how much can you get the return? It's a risk return ratio and that expected return even in the Japanese entrepreneurship that's much more limited than the US, that's my observation, that's much what I'm hearing from the Japanese entrepreneurs. Michael, do you wanna add something? I just want amongst participants here in this room including Yippe who is teaching in university in Japan and you may feel that it is not a matter of the framework, laws or regulations to enhance the animal spirit of all those youngsters in Japan. I believe it is so difficult for you lecturers to make them having more animal spirits but it is all up to you to stimulate all those youngsters having more encouraged to do ventures or to go against the rigid elders like me and all those young researchers here who is going to have some possibilities, opportunities to teach in Japan, it is all up to you, I hope good luck in the future, yeah. Yeah, I think I need to teach the student like that man but at the same time there's lots of system and as Sakake Parans mentioned that there may be some lots of opportunities funding but the students, maybe the banks and the financial systems are not catching up with maybe the financing the ventures, like if you want to start the business personal guarantee is necessary then if you fail your business, it's not the disaster for you, it's the disaster for whole family. So I think we need to enhance and encourage the student to be very enthusiastic but at the same time we need to look into maybe the reform of the, of course the labor market as well as the financial markets, yeah. Right, and so the next question is Bruce. Bruce Miller, Sakake Parans sensei, I listened with great interest to your account of the rigidity that applies still in the Japanese labor market. I am having served in government for 33 years, I'm now involved with several Japanese companies and visit Japan regularly in that capacity. I am listening to what you had to say, made me think about anecdotal evidence I've come across in the Japanese labor market of how young people are now moving companies more than they used to move. That level of more people now, particularly in their 20s and 30s are shifting after five years from one company to another, which I think is a breakdown to some extent in the rigidities that you are talking about. Absolutely. I've noticed it myself with Daichi Life is a company I'm particularly involved with in Japan at the moment. They're taking a lot of people laterally from the side in midlife in a way that never used to happen. And I think they're probably at the progressive end of Japanese companies, but I'm seeing that more and more. And I think that's quite an interesting phenomenon. I'd be interested in your comment on it. And secondly, I'd say I've also seen a greater degree of intra-company career diversity, if you like. Companies, because of economic pressures, because of the demand for labor, are breaking down the rigid barriers between different streams within companies and bringing in people from who are just doing straight administration work into more of a career stream or people in the sales force are now moving across into management positions. And that's actually enhancing diversity targets as well. So this is anecdotal, but I'd just be interested to see to know if you see a bigger pattern of that sort of thing going on in the Japanese labor market. Thank you. Yeah. Yes? Okay. Yeah, so young people, they don't really expect that they're gonna be in the same job and okay, with a sample of my nephew, he graduated from K.O. University and he joined one of the major consulting firm and I talked to him recently and he didn't expect that he's gonna be in the same consulting firm for a long period of time. And so that's really, I think the mentality of young people are changing, but what I see is the problem is that even though people are not really expected to stay in the same job for a long period of time, the system or the wage structure is such that that rewards the people who would stay in the same company and even if you move for the better opportunity, your wage doesn't go up. And so I think that is a problem. Regarding the inter-company career opportunities, I think it has been the norm. So the Japanese company is higher, a bunch of new graduates from college and the loaded people, let them experience various functions and that system works under the assumption that the company would exist for the next 25 years or so and but nowadays we can't really expect that. And so is the inter-company market more efficient than inter-company market? I think the latter is much more efficient, but again the skilled development to allow people to move outside of the company and to get better wage, I think the system is not there yet. Ko-san, do you want to add something? No, I don't have much to add, but in RICO, we are trying to establish a scheme that trying to shorten the regular working hour and allowing our employees to use the extra hour to do second kind of job lines. Moon lighting, it's kind of an offshore moon lighting. And so you could just cross the boundary of the job lines you have and experience more larger fields and then that will help you be more innovative or to lead you to reach good ideas in your major area. So this kind of trial is now happening in many Japanese big firms to encourage our employees to be more innovative, to conquer the difficulties now we face in Japan's economy. Okay, I think we have a lot of questions but the time is limited, so I would like to have one last question from Pete. And we're gonna have a coffee break afterwards and you have a lot of chance to ask him and you will be here throughout the day. So you are not allowed to escape, so they will be here, so you have a lot of chance to ask him a question. So Peter, could you ask a question? I think I've drived a little across the school here. You know, if you've been in US graduate school where they taught a course on the Japanese economy and Japanese business 30 or 40 years ago before you were born, they would have told you that all these institutions that you would have changed are the really powerful drivers of Japanese success and economic performance and competitiveness. So the question really is, what is the fundamental circumstance in the Japanese economy that make you want to change all these institutions that have been so important to Japanese growth? And secondly, on the entrepreneurship thing, by all indicators, Japanese entrepreneurship is very low. And yet as Kozo's indicators of Japanese productivity performance show quite clearly, Japanese productivity performance has been really quite good. How's this so? How do you reconcile those two? Inconsistent, apparently inconsistent facts. But Kozo, if you, at the beginning of your presentation, you had mentioned the US-China trade war and how important that was going to be. I just want to draw you out a bit on that. I mean, that's clearly important, not only for the US and China, but it's fundamentally important to Japan because China is a major element in Japan's economic competitiveness that production chains connect very closely with Japan. Japan's production chain connect very closely with China and Japan's competitiveness, industrial competitiveness, built on that. So what are the strategies that Japan needs to pursue in the face of the US-China, Japan? Yeah, final, but the big questions. Yeah, yeah, yeah. So that, yeah. Okay, I don't think I'm capable of answering, okay, answer those questions, but let me take the easier one first. So that is the relationship between productivity and entrepreneurship. And the point is that Japanese productivity is good, even though entrepreneurship is not fully developed. Okay, productivity, I studied productivity or innovation and the big rikas, one of the greatest scholar in the field of innovation and what I learned is that for any economic change to show up in productivity, it takes long years, like Kozu-san mentioned. For example, the steam engine to the electricity, right? It didn't show, it happened in the UK and doesn't show up in productivity because to fully appreciate using electricity in the factory, you don't have to change the full assembly line, the full design of the factory, design of the company, how they operate. Same thing as when the computer is introduced in the 70s. It doesn't show up in productivity statistics, not in the 80s, not in the 90s, finally in 2000, it showed up, the computer is really enhancing productivity. Why again, it fully embrace the computerization, you have to change the organization, how the information flow, how the information is stored, information is shared, so it takes a long time. So I think Kozu-san's point of the internet showing up productivity, we are not in terms of statistics, it's not there yet. We have to wait perhaps for the next 20 years to show up. I think the similar thing can be said to entrepreneurship. Okay, what do I want to change in the Japanese system? I'm not too sure, it's a fundamental problem, such a fundamental problem, perhaps in terms of entrepreneurship, Fujiwara-san mentioned, still the bank loan is one of the major sources to start a new business and if you fail, your house would be gone and your parents' house would be gone, right? So some kind of safety net or the more equity provision would be good, but other than that, there's such a fundamental problem. About the authorities, I think the Japanese authorities are trying to be less powerful in the area, in the existing area, established area. So they feel to introduce more competition amongst the existing business area, but for the new area, I think the new role for the authorities is coming up because all those kind of a network economy think it's more like in economics textbook, economies of scale issues are coming up and in those areas, I think the market mechanism doesn't work in a strict sense and therefore there are a room for maneuver for the authorities to get into all those networking or a framework for the new business area, or a framework kind of things to enhance the productivity as a whole. So probably Japan's authorities will shift towards the new area where they will find new role and then get out from the existing area, leave it to the market. That kind of changes I'm expecting and I think it is desirable. And about the why, so with so low entrepreneurship but productivity improving question. As far as the existing business feels concerned, I think thanks to the technological changes, I think labor productivity has been improving. When you look at the production lines or the daily businesses at the desks, the productivity improved very much thanks to all those internet. For example, when you have to write an essay, in my days I just have to go to, I had to go to the library and checking out all the papers or books. But nowadays all those students just looking through the Google and then cut and paste and present papers. That's not illegal. Not that I love that UCLA. On our side. Also we have a program to check the weight of all those cut and paste are less than a certain level of one month. So thanks to all those developments then, I think the productivity improved but yet it is a totally different thing to get into the totally new unexperienced area to establish business, to make it live longer and earn money. And as I said, the internet kind of businesses or GAFA kind of businesses or kind of winner takes all type of businesses. So the cost of entrant is quite higher than inventing small products. And therefore, I think Japan's lower animal split hinders to get into the fully new area. So these two things coexist in Japan. That's my understanding. On the third point, I haven't much talked to US people these days because they are very busy analyzing their own president. So many say that it is better to follow the Twitter of the president rather than analyzing the market or the economic status. And to great extent I agree with them. But the Chinese friends often contact me to study what we did in say 80s against the US. They just want to know the detail of how we negotiate and how we failed. So they are studying thoroughly about all those negotiation process between Japan and US in 80s and try to get some good from our failure. Well, I don't know. They say our failure, but who knows. But I'm telling all those Chinese friends that we are in the middle of, geographically Japan is in the middle of China and US, the two big economies on the globe. And Japan has its own history occupated by the United States. And so we just can't change that history and we can't formally or officially against the policy of the United States. But still our culture, our characters, or when you go to Kyoto or Nara, they say, I mean the Chinese say, they could enjoy the taste of their own cultures through the temples, shrines, which we imported say a thousand years ago. So having said that, we are in the middle of two countries. So there are distinction between what we can and what we can't. But still it means again, economics, text, context. There is some kind of a equilibrium between these two things. Trying to find that delicate balance is the way Japan will behave. So in most cases my Chinese friends understands what I'm saying. But when you go to the capital, Beijing, Oshali, they don't agree with me. So that's what I can say to your question. Thank you very much. There was something. Yeah, just to add to that point about Japan's experience in the 80s to deal with the trade friction against the US. I was a government official in the 80s in Japan and my impression is that Japan just gave up and followed whatever the US said. So I don't think it's a good model. Okay, thank you so much. It's an impressive ending of the session. Okay, thank you very much for participating in the economy. Panayana for the active discussion. And please join me in thanking for two fantastic speakers.