COVERLEAD

The Year of Economic Recovery?
By Naoyuki Haraoka

As vaccines have officially been accepted for use in theUnited States and United Kingdom, expectations arerising that an end to the public health crisis is in sight.
Will 2021 be the year of economic recovery? Will
uncertainty surrounding the global economy besignificantly mitigated? People all over the world havebecome exhausted in adjusting their daily lives to the“new normal” of wearing a mask, keeping social distanceand working remotely, and will look forward to morecertainty.
This issue introduces our readers to the views of theeconomists on the path to recovery. Internationalorganizations are considered to play a key role and thus
they are responsible for publishing their outlooks on how
the economy will proceed in the coming year. Our two
leading articles are interviews with IMF and ADB
economists on their latest economic outlooks for 2021 –Dr. Gian Maria Milesi-Ferretti, deputy director of theResearch Department of the IMF, and Dr. Yasuyuki
Sawada, the ADB’s chief economist. While the ADB’s
outlook is quite optimistic about the Asian economy, as
Asian countries are generally containing the pandemic
well and their recovery would be stable and robust, theIMF’s outlook is more cautious and characterizes therecovery process for the global economy in 2021 as “along, uneven and uncertain ascent”.
It is noteworthy that the IMF recommends maintaining
a stimulative fiscal and monetary policy to prevent theglobal economy from losing momentum. Anotherimportant suggestion made by the IMF is to strengtheninternational policy coordination, including vaccine
distribution among nations and fiscal and monetary
policies. Both economists express concerns about tradetensions, in particular the possibility of a US-China
decoupling as a major risk to a robust recovery, as wellas the risk of a continued public health crisis in 2021.
In the next article, World Bank economists Ayhan Kose,
Franziska Ohnsorge and Dana Vorisek talk about thepandemic’s impact upon Emerging Market & Developing
Economies. Their conclusion is also that great care andprudence will be necessary in withdrawing large-scale
2 Japan SPOTLIGHT • January / February 2021

fiscal and monetary stimulus for their economies inorder to avoid disastrous outcomes.
Sébastien Miroudot, a trade economist at the OECD,
contributes an interesting article on the pandemic’simpact on global value chains (GVCs). Many Asian
countries are concerned about disruption to GVCs fromthe pandemic, but his view is more optimistic. Another
IMF economist, Dr. Chie Aoyagi, talks about thepandemic’s impact on gender issues, and suggest that
men and women could finally find the best work-lifebalance as a result of having w orked remotely during
the pandemic. Finally, Dr. Keisuke Kondo, a senior fellow
at the Research Institute of Economy, Trade and Industry,suggests reshaping the urban-rural relationship in Japanby effective use of teleworking and online education.
The impact of the pandemic is not limited to theeconomy, but will impact economics as well. While
efficiency has been the principal criterion for economists
to judge economic performance, the pandemic has
started to move it to income equality, as inequality has
been seriously exacerbated by it. Sustainable
Development Goals (SDGs) such as wellness andhappiness are increasingly considered important policygoals.
As economic efficiency is not a top priority anymore, inthe trade policy area free trade may not be an ultimate
goal. Free trade may result in economic growth in thelong run because competition can achieve economicefficiency. However, in the short run, there will bewinners and losers and inequality will expand between
them. Economists will need to ensure that both income
equality and economic efficiency can be achieved
simultaneously. Globalization based on free trade hasachieved strong growth, but from now on globalizationmust be based on not only efficiency but also humanistic
values. Thus we may see the beginning of a changed
capitalism at the end of the pandemic. Our JapanSPOTLIGHT will highlight this in the coming months.
Anyhow, market mechanisms will not be almighty
anymore and a more evidence-based and neutral
approach rather than one preoccupied with a specifichttps://www.jef.or.jp/journal/

COVER
LEAD

theory will be recommended in the new economics.

other group of nations.

(Brief Introductions)

COVER STORY 4
Impact of Covid-19 on Global Value Chains

COVER STORY 1Interview with Dr. Gian Maria Milesi-Ferretti, Deputy Director of the Research
Department of the IMF

The IMF’s Assessment of the Struggling Global Economy Under theCovid-19 Pandemic & Prescriptions for Recovery
By Japan SPOTLIGHT

The IMF outlook estimates the global economic growth rate at
5.2% in 2021. It assumes implicitly that the pandemic crisis
will be largely contained by the end of 2022. But as thepandemic’s impact upon the global economy will remain in thelong run, for the first time the IMF has produced a forecast
over a five-year horizon. Assuming that the good effects ofvaccines will be seen by April 2021, mitigating uncertainties,
we will have a better idea of the longer-term economic
difficulties.
COVER STORY 2
Interview with Dr. Yasuyuki Sawada, Chief Economist of the AsianDevelopment Bank

Asia to Lead a Global Economic Recovery in 2021 After thePandemic Recession
By Japan SPOTLIGHT

The ADB outlook estimates Developing Asia’s growth rate
in 2021 at 6.8%, stronger than the global economic
growth rate in 2021 estimated by the IMF. Thus, Asia’spresence will be enhanced. But its responsibility for global
governance will increase as well. The RCEP and CPTPP orother regional FTAs in Asia are expected to prevent theworld economy from falling into a decoupling, with theUS-China hegemonic conflict possibly intensified by thepandemic.
COVER STORY 3
Impact of Covid-19 on Emerging Market & Developing Economies
By M. Ayhan Kose, Franziska Ohnsorge & Dana Vorisek

It is to be noted that the learning disruptions associatedwith widespread school and university closures, as well as
income losses, may cause lasting setbacks to humancapital accumulation, which is in particular more serious
for Emerging Market & Developing Economies than any

By Sébastien Miroudot

GVCs would be largely well preserved even in thepandemic, though fine tuning business strategies such as
diversification of sources of materials and components orreshoring of production may happen on a small scale inorder to make it more resilient to risks. Policies to enforce
companies to reshore their production bases or diversify
procurement sources of components and materials will
not be sustainable, as their productions cost wouldbecome unreasonably high.
COVER STORY 5Guilt, Gender & an Inclusive Recovery: a Lesson from Japan
By Chie Aoyagi

Japanese women who greatly desire to work but who may
feel guilty about leaving their kids in childcare facilities
could find a way both to work hard and take care of theirchildren by themselves by taking advantage of teleworking
at home, as widely adopted during the pandemic.
COVER STORY 6
How Will Covid-19 Reshape Cities in Japan?
By Keisuke Kondo

Another possible impact of teleworking and online
education under the pandemic could be to encourage
urban-to-rural migration. This could lead to the formationof multipolar sustainable cities in Japan. These revitalized
regions could be a basis for the long-term prosperity ofJapan.
So the long-term consequences of the pandemic, as thelast two authors ingeniously point out, could be positivein that they may enhance the potential growth of oureconomy. We can turn the crisis into an opportunity.
Naoyuki Haraoka is editor-in-chief of Japan SPOTLIGHT & executive
managing director of the Japan Economic Foundation (JEF).
Japan SPOTLIGHT • January / February 2021

3