Economic ideas for Takaichi Sanae – Noahpinion | Noah Smith

Report on the Economic Agenda for Japan’s New Administration and Alignment with Sustainable Development Goals

Introduction: A New Era for Sustainable Development in Japan

The appointment of Takaichi Sanae as Japan’s first female Prime Minister marks a significant milestone, directly advancing Sustainable Development Goal 5 (Gender Equality). This new leadership presents an opportunity to address pressing economic challenges and steer the nation towards a more sustainable and prosperous future. While Japan currently benefits from a stable macroeconomic environment, characterized by low unemployment and manageable government debt, stagnant living standards necessitate a focus on structural reforms. The Takaichi administration is positioned to concentrate on enhancing Japan’s underlying economic model to promote productivity and growth, in line with SDG 8 (Decent Work and Economic Growth) and SDG 9 (Industry, Innovation, and Infrastructure).

Strategic Priorities for Sustainable Economic Transformation

1. Revitalizing Investment for Sustainable Industrialization (SDG 9)

   A primary challenge is Japan’s comparatively low level of capital formation relative to its East Asian competitors. To foster sustainable industrialization and maintain competitiveness, the administration must stimulate investment.

   Key Action Areas

   • Boost Capital Demand: Counteracting a shrinking domestic market requires a stronger focus on becoming an export-oriented economy. Expanding trade with Europe, India, Southeast Asia, and other regions will create incentives for domestic investment, supporting SDG 8.
   • Improve Capital Supply: The financial system must be reformed to better support small and medium-sized enterprises (SMEs). Providing greater access to bank loans for scaling up operations is crucial for fostering the innovation required to achieve SDG 9. This involves shifting from the past practice of supporting weak “zombie” companies to financing high-growth potential firms.

2. Promoting Greenfield Foreign Direct Investment (FDI) (SDG 8, SDG 9, SDG 17)

   Increasing greenfield FDI—where foreign entities build new facilities in Japan—is an essential strategy for sustainable growth. This approach adds a vital component to the domestic economy, strengthening global partnerships as outlined in SDG 17 (Partnerships for the Goals).

   Benefits Aligned with SDGs

   • Economic Growth and Decent Work (SDG 8): Greenfield FDI increases demand for local labor, leading to higher wages.
   • Innovation and Infrastructure (SDG 9): It facilitates the transfer of foreign technology and managerial expertise, enhancing Japan’s technological capabilities and industrial base.
   • Global Partnerships (SDG 17): At a time of geopolitical shifts, attracting FDI from partners like Taiwan, South Korea, and the United States can secure supply chains and build resilient economic alliances. The recent investments by TSMC and Samsung exemplify this potential.

3. Advancing Corporate Governance and Gender Equality (SDG 5, SDG 8)

   Transforming Japan’s traditional corporate culture is fundamental to improving productivity and achieving inclusive growth. Recent progress in this area must be accelerated.

   Areas for Continued Reform

   • Labor Market Flexibility: Encouraging mid-career hiring and flexible working arrangements helps create a more dynamic labor market and a results-oriented culture, contributing to SDG 8.
   • Gender Equality in Leadership (SDG 5): The steady rise in the percentage of women in management must continue. Government policy should persist in pushing companies to promote more women into leadership positions, which is critical for both social equity and economic performance.
   • Merit-Based Promotion: Reducing the reliance on seniority-based promotion is necessary to empower younger, innovative leaders who can adapt to new technologies and business models.

4. Developing a Modern Defense Industry for Peace and Innovation (SDG 9, SDG 16)

   The administration’s focus on defense can be leveraged to achieve broader sustainable development objectives. Rearmament, framed within the context of ensuring regional stability and contributing to SDG 16 (Peace, Justice and Strong Institutions), offers a significant opportunity for technological advancement.

   Dual-Benefit Strategy

   • Fostering Innovation (SDG 9): Increased government R&D spending through the defense sector can stimulate, or “crowd in,” private-sector research. This investment can lead to technological spillovers that boost the civilian economy, creating a more innovative and resilient industrial base.

5. Ensuring Affordable and Clean Energy (SDG 7)

   Japan’s high industrial electricity prices hinder its manufacturing competitiveness. A strategic shift towards domestically produced, clean energy is essential for energy security and sustainability.

   Priorities for Energy Policy

   • Alignment with SDG 7: The administration must prioritize policies that deliver on SDG 7 (Affordable and Clean Energy) by reducing reliance on volatile fossil fuel imports.
   • Nuclear and Solar Expansion: Accelerating the restart of all 33 existing nuclear reactors is a key priority. Concurrently, efforts to expand solar power deployment, including through innovative agrivoltaics, should be continued to build a secure and low-carbon energy system.

6. Building a Robust Digital Economy (SDG 8, SDG 9)

   Japan’s significant “digital deficit,” caused by a weak domestic software industry, is a critical vulnerability. Addressing this requires a concerted effort to cultivate a skilled digital workforce.

   Cultivating a Skilled Workforce

   • Addressing the Talent Shortage: The government must work to make software engineering a more prestigious and attractive career path for young talent. This is fundamental to building the innovative capacity required by SDG 9.
   • Leveraging AI: Artificial intelligence can help bridge the skills gap by boosting the productivity of software engineers. Educational institutions should lead in teaching students to code with AI tools.
   • Creating High-Value Jobs (SDG 8): Establishing elite AI and cryptography units within government ministries and the military could create high-prestige jobs, attracting top talent that will eventually fuel the growth of the private-sector software industry.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

The article on Japan’s economic and political landscape under its new prime minister, Takaichi Sanae, touches upon several Sustainable Development Goals (SDGs). The analysis reveals connections to the following goals:

• SDG 5: Gender Equality – The article highlights the appointment of Takaichi Sanae as Japan’s first female prime minister and discusses the ongoing need to increase the number of women in management positions within corporate Japan.
• SDG 7: Affordable and Clean Energy – A specific section is dedicated to the issue of high electricity prices in Japan. It advocates for reducing reliance on fossil fuel imports by expanding domestic energy sources, specifically solar and nuclear power.
• SDG 8: Decent Work and Economic Growth – This is a central theme of the article. It extensively discusses Japan’s stagnant living standards, low unemployment, the need to boost productivity, increase investment, and reform corporate culture to foster sustainable economic growth.
• SDG 9: Industry, Innovation, and Infrastructure – The article proposes several strategies that align with this goal, including increasing investment in new factory technologies, enhancing research and development (R&D) through defense spending, building a more robust software industry, and improving financing for small and medium-sized enterprises to scale up.
• SDG 16: Peace, Justice, and Strong Institutions – The discussion around rearming Japan, strengthening its defense industry, and managing geopolitical threats from China relates to the goal of building effective and accountable institutions to ensure peace and security.

2. What specific targets under those SDGs can be identified based on the article’s content?

Based on the issues and proposed solutions in the article, the following specific SDG targets can be identified:

1. Target 5.5: Ensure women’s full and effective participation and equal opportunities for leadership at all levels of decision-making in political, economic and public life.
   • The article directly addresses this by noting Takaichi Sanae’s historic appointment as the “first female leader” and by citing the need to “continue pushing companies… to promote more women.”
2. Target 7.2: By 2030, increase substantially the share of renewable energy in the global energy mix.
   • The article supports this target by recommending that Japan “focus as much as possible on energy sources it can produce at home — solar and nuclear.” It mentions government efforts to “accelerate solar deployment.”
3. Target 8.1: Sustain per capita economic growth in accordance with national circumstances.
   • The article’s primary focus is on reversing Japan’s “stagnant” living standards and restoring “economic growth and technological might,” which directly aligns with this target. The chart comparing Japan’s GDP per capita with South Korea’s underscores this concern.
4. Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading and innovation.
   • This is addressed through proposals to transform corporate culture to fix “slow productivity growth,” invest in “the next generation of factory technologies,” and build up the weak software industry to avoid a “digital deficit.”
5. Target 8.3: Promote development-oriented policies that support productive activities… and encourage the formalization and growth of micro-, small- and medium-sized enterprises.
   • The article identifies a critical problem where Japanese companies struggle to “grow from a medium-sized company to a big one” due to a lack of financing. It suggests that “banks need to lend more to smaller, growing companies looking to scale up their operations.”
6. Target 9.3: Increase the access of small-scale industrial and other enterprises… to financial services, including affordable credit.
   • This target is directly implicated in the discussion of the “valley of death” for hardware startups, which need “bank loans” for “patient long-term financing” to scale up their operations.
7. Target 9.5: Enhance scientific research, upgrade the technological capabilities of industrial sectors… encouraging innovation and… increasing… research and development spending.
   • The article advocates for using rearmament as a “golden opportunity to boost the country’s R&D capabilities,” citing research that shows government-funded defense R&D “crowds in” private-sector research and leads to “productivity gains.”
8. Target 16.a: Strengthen relevant national institutions… to build capacity at all levels… to prevent violence.
   • The article discusses the need to “rearm in the face of the overwhelming Chinese threat” and to “build a better defense industry.” This involves strengthening national defense institutions to maintain peace and deter potential conflict.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

Yes, the article mentions or includes data for several indicators that can be used to measure progress:

• Indicator 5.5.2 (Proportion of women in managerial positions): The article includes a chart titled “Percentage of Women in Management,” showing a steady rise in recent years. This directly measures progress toward Target 5.5.
• Indicator 7.2.1 (Renewable energy share in the total final energy consumption): Progress is measured by the chart showing “Japan’s electricity generation by source,” which breaks down the percentage contribution of solar, nuclear, coal, and natural gas.
• Indicator 8.1.1 (Annual growth rate of real GDP per capita): The chart comparing “GDP per capita, PPP” between Japan and South Korea is a direct representation of this indicator, used to highlight Japan’s economic stagnation.
• Indicator 8.5.2 (Unemployment rate): The article provides a chart of the “Unemployment rate in Japan” to show that the country is in a good macroeconomic situation with very low unemployment.
• Indicator 9.5.1 (Research and development expenditure as a proportion of GDP): While showing US data, the article’s argument for Japan to boost R&D through defense spending implies that R&D spending as a percentage of GDP is a key metric for measuring innovation capacity.
• Foreign Direct Investment (FDI) as a percentage of GDP: The article uses a chart showing “Foreign direct investment, net inflows (% of GDP)” to argue that Japan needs to boost “greenfield FDI” to increase investment and labor demand. This relates to targets under SDG 8 and 9.
• Exports of goods and services (% of GDP): A chart with this title is used to show that Japan exports very little compared to other economies, supporting the argument that it needs to become a more “export-oriented economy” to drive growth (Target 8.1).

4. SDGs, Targets, and Indicators Summary

Source: asiatimes.com