Japan outlines vision for a new form of capitalism

Japanese Prime Minister Kishida Fumio has called for a new form of liberal democratic capitalism, balancing economic growth and distribution, in a special address to business, government and civil society leaders taking part in the World Economic Forum’s virtual event, the Davos Agenda 2022. In the address he said “a key focus of my administration will be the revitalisation of Japan through a new form of capitalism”. Unfettered state capitalism without adequate checks and balances produces problems such as widening income gaps, rural-urban disparities and social tensions, he added. Kishida emphasised that the time has come for “historic economic and social transformations”. He said Japan will pioneer a new form of public-private partnership, with leaders of government, industry and labour all working together to develop paradigm-shifting policies. “There has been an overreliance on competition and self-regulation to constrain the excesses of market forces,” he added. “This must change.”

These reforms will build on emerging strength shown by Japan’s economy. However, he reiterated that current policies are not sufficient to ensure that growth is sustainable and inclusive. The prime minister called for Japan to lead the world in green transformation. He said investment in green technology “will be more than doubled” and become an engine of growth. He also announced that a carbon pricing system will be introduced as soon as possible and Japan will continue to support the Asian emissions trading market. “Japan remains committed to the Paris Agreement and will achieve carbon neutrality by 2050,” he said. Private and public sector leadership will work tightly together on the demand and the supply side to support the transformation. One focus for Japan’s clean energy strategy is to reform the energy sector, which accounts for more than 80% of greenhouse gas emissions. Smart grids, upgraded power and distribution networks as well as low-carbon energy sources like solar and wind energy are all part of the solution, he said.

Another important pillar for Japan’s transformation is digitisation. “While Japan has traditionally lagged in digital uptake, COVID-19 has given Japan a chance to leap-frog its digitisation efforts,” Kishida said. To support this, the government will invest heavily in next-generation networks, optical fibre and 5G-related infrastructure – extending it to 90% of the population over two years. Kishida also laid out plans for increased corporate disclosure to encourage investment in human capital. “Investment in people is often regarded as a cost, but it is a source of medium to long-term corporate value,” he said. The prime minister pointed out that Japan continues to take a cautious approach to COVID-19, with borders closed until the end of February. “Changes will be made to border policies as more data comes in,” he said. The government is taking a realistic view and he stressed that a zero-tolerance policy towards COVID-19 is neither possible nor appropriate. Klaus Schwab, the World Economic Forum’s Founder and Executive Chairman, thanked Japan for taking an active part in collaborative global efforts to combat shared challenges. “The capabilities of the Fourth Industrial Revolution open up new possibilities and opportunities,” Schwab said. “The future will be much greener, more digital and human-centred.”