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Research Areas & Themes ( 2018 ): Politics / Economics

Agricultural policy

Project Leader
Research Objective Agricultural policies have been one of the factors that have hindered Japanese agriculture from fully developing international competitiveness. There are three underlying causes to this problem: 1) Japan's farm income support policy, which is excessively dependent on price support policy originating from the food control system during World War II; 2) Japan's farmland system, which has focused only on maintaining the small farmers with their own farmland produced through the agrarian reform just after World War II and interfered with scale expansion through farmland liquidity; 3) Japan's agricultural cooperative system supportive of the JA cooperative, which led to the realization of the high price of rice as the most powerful pressure group in postwar Japanese politics and developed through a shift away from farming, as more farmers took on side jobs. Although the direction of reform to address these problems is beginning to be seen, there is much to be done to complete the reform. On the contrary, some areas, such as the acreage reduction policy, have seen changes for the worse from the viewpoint of agricultural development and food security. We will make robust recommendations on agricultural policy reform to make the agricultural sector stronger and more competitive in exports.
There have been movements and trends toward reforming agriculture through the adoption and utilization of information technology, artificial intelligence, biotechnology, and enterprise management techniques. However, the media and think tanks have been eager to emphasize only positive opportunities, presenting discussions and arguments far from the realities experienced by farmers, and failing to propose realistic measures to improve agricultural management. For example, GPS technology is only useful for fields that are large enough. The use of novel technology requires larger farms and a reform of the agricultural structure. We will research measures that would modernize and streamline farm management, increase the international competitiveness of Japan's agricultural sector, and cultivate new export markets by analyzing challenges for the use of recent technology and proposing necessary policies.
Project Overview We will exchange opinions with farmers and farm produce processing/distribution businesses to understand the current situation of agriculture. While being based on economics, we will make recommendations centering on the three pillars of agricultural policy: price support policy, farmland policy, and agricultural cooperative policy.
The project will study the possibility of developing Japan's agriculture by introducing and utilizing information technology, biotechnology, and other advanced technologies, as well as policy frameworks needed for this, while examining the trends in Japan's agriculture and agricultural ventures, and similar initiatives in developed countries such as the Netherlands, the US, Australia and New Zealand.

Trade Policy

Project Leader
Research Objective An agreement in principle was reached in November 2017 with respect to TPP 11, after the Abe administration radically changed its policy against the trade deal without the US earlier in the same year. A general agreement was also reached on the Japan-EU Free Trade Agreement. Although TPP 11 provides a mechanism for the US to rejoin the TPP, the prospects of it happening are uncertain. Negotiations for the Regional Comprehensive Economic Partnership (RCEP) are also in progress. Meanwhile, unnecessary and overcompensatory measures have been decided to prepare the agricultural sector for trade liberalization. Our research studies and analyzes developments in these negotiations and Japan's domestic measures, and recommends desirable policies.
Project Overview The project leader will exchange views with negotiators, thinktank researchers and scholars of international economics and international economic law in Japan and elsewhere, and study and analyze the future of trade negotiations based on the insights gained.

Forestry policy

Project Leader
Research Objective Two-thirds of Japan's national land is covered with forests. Along with their role in recharging water resources and preventing floods, forests are now attracting attention as sinks for greenhouse gases. However, even though Japan is said to have entered an age of domestic timber, stagnant lumber prices and other factors are causing forestry to decline. For the lack of thinning and other appropriate forestry management practices, forests stop short of fully performing their external economic functions as mentioned above. In addition to analyzing forestry problems from multifaceted angles, we will research the conditions required for regeneration of forestry and the policies needed for providing such conditions.
Project Overview We will exchange opinions with those engaged in forestry, as well as forestry policy makers and researchers, and make policy recommendations based on statistics.

Analysis on Chinese economy

Project Leader
Research Objective The Chinese economy is at the final stages of its high-growth period, showing a gradual decline in the growth rate over the medium to long term. However, current macroeconomic trends suggest that the economy will remain stable for the time being. Corporate earnings have improved mostly because overcapacity and excess inventory have been reduced under the Xi Jinping administration's policies, such as new normal and supply-side reform, and production capacity and employment are in a positive cycle as the economy continues moderate growth.
However, China faces many medium-term challenges, including the risk of resurgence of a real estate bubble due to excessive liquidity, local governments lacking in stable revenue sources, the risk of financial instability induced by financial liberalization, and growing fiscal burdens resulting from the improved social security system. We will closely watch how the second Xi Jinping administration will deal with these issues after the 19th Party Congress.
Meanwhile, 2018 marks the 40th anniversary of the Japan-China Treaty of Peace and Friendship and expects to see improvements in Japan-China relations. We will observe trends in interactions between the two countries, such as changes in Japanese company investments in China driven by their continued robust performance in the Chinese market, and the effects that trends among inbound tourists from China have on the Japanese economy. Based on the findings, we will perform a short-term economic analysis and predict the medium-term influence on Japan-China relations.
Project Overview Through periodical visits to China for direct interviews, we will collect accurate and timely information from reliable sources, such as Chinese government officials, scholars, economists, and Japanese business leaders in China. Based on the collected information, we will gain a comprehensive understanding of China's economy, including its macroeconomy, regional economies, industry-specific trends, financial trends, and the progress in reform of state-owned companies. While factoring in domestic political developments and Japan-China relations, we will provide a simple description of Japan-China economic relations and the realities of the Chinese economy.

A Globally Connected Japan-Élan Vital Japan Version 2.0

Project Leader
Project Member(s)  ・   ・ 
Collaborator(s) Kiyoshi KUROKAWA(The National Graduate Institute for Policy Studies (GRIPS)), Yukio HONDA(Osaka Institute Technology)
Research Objective The project aims to provide recommendations that will help Japan set a new path for the future through research based on the close analysis of specific measures to use ICT - research in the high-tech health and welfare sector using ICT.
Project Overview We will hold workshops on specific topics and compile reports.

Assessment and analyses of the long-term strategic trend in East Asia

Project Leader
Project Member(s)  ・   ・   ・ 
Research Objective The project conducts a comprehensive analysis and assessment of long-term changes in the trend of the relationship between major powers in East Asia through 2050. Focus will be placed on strategic geo-political trends, including major power competition between the US and China. The project aims to identify the major strategic trends in East Asia which are to be expected over the long-term, and explore how the international relations in East Asia can be stabilized.
Project Overview (1) Study group for long-term analysis of East Asia
We will hold study group meetings regularly, approximately once a month, to discuss long-term strategic trends in East Asia, particularly expected economic, political and social changes, as well as the impact that these changes will have on international relations in East Asia over the medium to long term. Based on the results, the CIGS will organize a symposium on the long-term strategic trend in East Asia.
(2) Invitation of foreign researchers on China
We will invite a few foreign researchers on China to monthly study group meetings to discuss long-term strategic trends in East Asia, especially in relation to China.

China's banking system reform and capital market development

Project Leader
Research Objective China made significant progress in the full-scale reform of the banking sector during the decade that followed its accession to the WTO in December 2001, including five major banks becoming listed on stock exchanges, a shakeout among city commercial banks, and establishment of the foundations of the rural financial system. This series of reforms resulted in a better financial situation for major commercial banks, bringing more stability to China's financial system and by extension markedly contributing to the stability of the economy and society. However, it should be noted that the recovery of the banking system owes much to China's restrictive competition policy, including regulated interest rates. In a high-growth economy, China experienced a wide range of phenomena that worked in favor of banks disposing of non-performing loans, such as rising prices of property used as collateral and an increasing number of start-ups.
Since the beginning of the 2010s, the climate for China's banking sector has been deteriorating for factors such as slower economic growth, adjustment of excess production capacity, and intensifying (partial) competition among banks. Yet China's Communist Party leadership continues to require strongly that the financial sector should contribute to the real economy.
This project studies reforms needed for China to allow its banks to provide funds essential to economic growth efficiently and reliably, based on an analysis of the country's financial sector's current situation and a comparison with experiences in other countries. The project will also analyze the situation associated with the risks faced by China's financial systems, including rapidly growing Internet financing and other new financial services, and propose ways for improvement.
To reduce the concentration of risks on the banking sector, China continues its effort to develop capital markets. The project will examine its progress, identify impediments to market development, and recommend possible improvements.
Project Overview We will analyze and evaluate the outcomes of past reforms, especially banking system reforms, and future challenges for financial systems that perform the fund allocation function, which is key to the shift in the Chinese economy growth model. Our research analyzes these issues from multiple perspectives, based on policies announced by the Chinese government and statistics made available to the public, along with anecdotal information, mainly to:
(1) Collect and organize materials and financial statistics published by the Chinese government, market operating bodies and financial institutions, and evaluate and analyze the financial standing and risk management operations of financial institutions, as well as challenges facing them,
(2) Evaluate the state of corporate governance and the relationship between earnings and non-performing loans for major listed banks for which relatively detailed financial data is readily available,
(3) Summarize the outcomes of corporate bond market development, identify problems with it, and study challenges for improvement,
(4) Search for the adequate process and pace of liberalizing the interest rate and deregulating capital transactions by summarizing and analyzing current impediments.
By publishing interim reports and working papers in the course of the research, comments from intellectuals will be sought. The project leader will visit, at appropriate times, markets in China and Hong Kong, as well as Asian and European markets where RMB trading is growing, to exchange views with market participants and researchers and to improve the quality of the research outcome.

The role of fiscal policy in China in its pursuit of a smooth shift to steady economic growth

Project Leader
Research Objective Rationally restructuring the relationship between the central and local governments, and the relationship between government and the market is vital to strengthening China's state governance. This project will deepen the research performed in 2016 and 2017 on the sustainability of China's finances, which is a crucial factor to achieving the above goal, and study it further with international comparisons.
China's Communist Party leadership declared in the early 1990s that it would build a "socialist market economy" by setting it as the grand goal of economic policy operation. China has succeeded in growing its economy markedly by focusing on overcoming near-term challenges, while leaving a great deal of ambiguity as to the division of roles between the central and local governments and the balance between the government and market functions. However, with the nation's high growth period coming to an end, the government faces the need to resolve various contradictions, typically economic inequality, among its massive population across the vast land by taking a more sophisticated approach.
This project aims to study how China should secure revenue sources and allocate revenue to implement fiscal policies transparently and fairly. As the first step of the study, we will endeavor to understand China's fiscal position accurately and identify where problems lie.
Project Overview We will study the stability and sustainability of China's fiscal systems by gathering and organizing reviews presented in preceding research in China and elsewhere, reports by the Chinese government and information provided by the Chinese and international media, including the following activities:
(1) Ascertaining the realities of the disposal of local government debts, including the methods used, as intensive efforts toward disposal continue in China, and analyzing the sustainability of local government debts
(2) Deepening the insight into the prospects for China's social security expenditures, which were estimated in the research performed in 2016 and 2017
(3) Advancing study on the prospects for the resolution of the "implicit guarantee" issue, which is often raised in the context of China's financial and fiscal affairs

Changes in international capital flows in China

Project Leader
Research Objective As the Chinese economy globalizes, China's cross-border capital movements are increasing rapidly. The Chinese government maintains a cautious stance on the deregulation of capital transactions in principle, keeping the nation's free cross-border capital movements modest, except for trade and inward/outward direct investments. However, given the size of the Chinese economy, and the fact that China's overall trade volume and inward/outward direct investments are enormous in the first place, only a small capital movement originating from the country can have a major impact on the Asian, or even international, financial market.
This project studies how China's financial liberalization should be paced by reexamining current international capital movements there, and analyzes the signs of changes in cross-border capital movements involving China to determine the influence of the "One Belt, One Road" initiative pursued by the government.
Project Overview The project leader will earnestly attend academic workshops in Japan and abroad to exchange views with experts. A part of the presentations that the project leader will make will be published (e.g., on the website of the CIGS) to invite comments on the research results.
With respect to China's economic negotiations with the US, an increasing number of questions have been received from Chinese researchers on Japan's experiences in its financial and other negotiations with the US in the 1980s. The project will deepen the discussion on the path of China's financial liberalization by taking advantage of opportunities to respond to such questions.

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