Chiseigaku-teki Risk to Nihon Keizai (Geopolitical Risks and the Japanese Economy - Desirable Reform in the New Cold War)

This book examines the impact of heightened geopolitical risks on the Japanese economy in the post-pandemic period. When we planned to publish the book in spring 2022, only a few months had passed since Russia began its invasion of Ukraine. Even then, however, the invasion had already presented the global economy with entirely new and unprecedented challenges. Supply chain disruptions caused prices, particularly for primary commodities, to soar. This triggered severe inflation worldwide. Even in Japan, where low inflation had persisted for a long time, the weakening yen and rising import prices were gradually increasing the prices of consumer goods, especially necessities like food and energy. This was beginning to seriously impact people's daily lives. Against this backdrop, Japan needed to fundamentally reexamine the nature of its economic and social activities and boldly pursue reforms to its economic structure in light of heightened geopolitical risks.
 
Recently, the international environment surrounding Japan has become more severe. New sources of turmoil are emerging worldwide. These include heightened tensions in the Middle East due to the Israel-Hamas conflict, the growing divide between authoritarian states such as China and Russia and democratic nations, domestic political turmoil in Europe, and the "America First" policy of the second Trump administration. If these geopolitical tensions escalate, the global economy will become more unstable. Furthermore, many nations in Asia, Africa, and Latin America—once termed "developing countries"—are now referred to as the "Global South" and are gaining significant prominence in the international community. Against this backdrop, Japan must transform its economic and social activities to adapt to this new era while navigating heightened geopolitical risks and a multipolarizing global economy. This book addresses the challenges Japan must overcome regarding its economy's structural issues in this new phase of the global economy.
 
Even before the rise in geopolitical risks, Japan's economy was already grappling with various structural problems, such as an aging population and a declining birthrate. Furthermore, fiscal policy grapples with the critical challenge of halting the accumulation of an extremely severe fiscal deficit, while monetary policy confronts the major task of normalizing ultra-low interest rates. Unlike other major economies, Japan's longstanding structural challenges remain unresolved amid high inflation. The question remains: How should economic policy be steered while grappling with structural challenges from the deflationary era that persist even amid inflation? The answer is not straightforward. To address this concern, this book features experts from various fields discussing the trajectory of the rapidly transforming economy and society in the new era. The book is written in accessible language for a broad readership.
 

(Written by FUKUDA Shin-ichi, Professor, Graduate School of Economics / 2025)