COVERLEAD

Exploring the New Economy
Under Covid-19
By Naoyuki Haraoka

More than six months have now passed since
the World Health Organization declared Covid-19
to be a pandemic on March 11. But we cannot yet
see any sign of the pandemic being contained bypublic policies or by people’s own efforts toprevent the spread of infections. The majority ofvirus experts expect the pandemic to continue forat least another year until vaccines can become
available around the world. Thus we need to think
about how the economy and society will bechanged by this pandemic and how we can turnthis challenge into an opportunity for recovery andgrowth.
This issue highlights a variety of views among
economists, industrial policy experts, fiscal policy
experts, and business management experts. The
common denominator is a long-term perspective,
since even if the pandemic comes to an end within
one year its impact on the economy and society
will remain for many years. Economic growth rates
may pick up in 2021 from the negative rates in2020 in most nations, but even possibly robust
growth such as 5.0% in terms of real GDP would
not enable GDP to return to levels prior to thepandemic, due to the huge decline in effective
demand resulting from both soft and hard
lockdown policies. It is not only GDP but also
industrial structure, business management andbehavior, and innovation in the economy that will
not return to their original state for many years.
Our Cover Story begins with an overview by
Udith Sikand, an emerging markets analyst at
Gavekal, on the prospects for a new economic
society under Covid-19. Two Japanese businesseconomists, Takuji Aida and Koichi Kurose, focus
their thoughts on the Japanese economy, while
2 Japan SPOTLIGHT • November / December 2020

Prof. Kazumasa Oguro, one of our JapanSPOTLIGHT Editorial Committee members, offers
his view on PCR testing to mitigate virus infections
and restore the economy simultaneously. This may
appear to be a short-term policy, differing from thelong-term perspective on the pandemic’s impact
on the economy, but assuming that the virus willremain for a long time and infections will not
disappear easily, this could be regarded as along-term view. Controlling infection rates must be
the most important long-term economic policy inthis light.
We will need to strengthen the supply side of theeconomy and the competitiveness of industries
seriously affected by disruptions to global supply
chains due to the pandemic or to huge declines indemand. We will need good industrial policies torestore such competitiveness. We will also need toenhance overall labor productivity to restore thegrowth potential damaged by reduced demand. Dr.
Karl Aiginger, a distinguished industrial policy
expert, highlights the role of industrial policy inthis regard.
In restoring industrial competitiveness andgrowth potential, innovation will be another key.
We highlight in this context the views of business
management experts. How can businesses
become more innovative by the introduction of
new management? How can they survive thepandemic and turn the crisis into business
opportunities for the restoration of prosperity?
Two well-known business management experts,
Dr. Gary Hamel and Darrell Rigby, respond to
those questions in interviews.
https://www.jef.or.jp/journal/

COVERLEAD

It would be a source of happiness if thepandemic could bring us benefits, apart from all
the calamities. With the right efforts, we can create
opportunities for prosperity in the long run.

COVER STORY 4
Expansion of PCR Testing Is the Key to an Exit Strategy, But WhichIs More Important – Sensitivity or Frequency of Tests?
By Kazumasa Oguro(Brief Introductions)

The key to an exit strategy from the negative
consequences of the pandemic in terms of publichealth and economy must be “expansion of PCRtests”.

COVER STORY 1

COVER STORY 5Interview with Udith Sikand, Senior Emerging Markets Analyst, Gavekal
Research Ltd.

Interview with Dr. Karl Aiginger, Director of the Policy Crossover Center:Vienna-Europe

Global Investment Analyst Provides Views on the Prospects for a
New Economic Society with Covid-19

Industrial Policy to Be Highlighted in the Age of the Pandemic

By Japan SPOTLIGHT

An industrial policy must not be a silo policy but
connected with health management, equality of races,
and openness of hospitals to everybody to prevent theworst negative consequences of the pandemic for theeconomy.

To be successful in restoring the economy from thedisastrous effects of the pandemic, monetary, fiscaland structural policies need to be implemented
together in a logical and mutually reinforcing
sequence.
COVER STORY 2
With Fiscal Expansion in Response to the Coronavirus, Abenomics
2.0 Can Bring Japan Out of Deflation

By Japan SPOTLIGHT

COVER STORY 6Interview with Dr. Gary Hamel, Co-author of the book Humanocracy

How Can We Revive Organizations as Innovative as the People
Inside Them?

By Takuji Aida

By Japan SPOTLIGHT

A premature shift back to contractionary fiscal policies
after Covid-19 in Japan, driven by fears of atremendous increase in government debt, would bring
Japan back into deflation.

COVER STORY 7

Management belief in the freedom of individual
employees would lead to creativity and innovation, as
his recently published book Humanocracy reveals.
Interview with Darrell Rigby, Partner, Bain & Company

COVER STORY 3
Impact of Covid-19 on Financial Markets – Japanese Economy
Peaked Prior to the Virus

The Crisis in Public Health & Economy – Innovation to Tackle theChallenges

By Koichi Kurose

Establishing agile teams in a company is the first step
towards innovation. Executives must build confidence
in agile values, principles and practices.

Widespread use of a vaccine and the development of
herd immunity which could take many years to affectthe entire world will be necessary to win the war
against the virus, but this is the most importanteconomic policy and should be followed bygovernment debt consolidation, corporate debt
repayment and normalization of monetary policy.

By Japan SPOTLIGHT

Naoyuki Haraoka is editor-in-chief of Japan SPOTLIGHT & executive
managing director of the Japan Economic Foundation (JEF).
Japan SPOTLIGHT • November / December 20203