C O V E R

L E A D

By Naoyuki Haraoka

Will 2017 be a good year or a bad year? Will volatility in the global
economy decrease or increase? This may well depend on nations’policies as well as business strategies. There will be many elections
around the world in 2017. New governments, including in the UnitedStates, are going to launch new policies in line with politicalphilosophies that could be totally different from those of the previousgovernments. Whether 2017 is good or bad, it will doubtless be ayear of politics.
We are living in a world where politics and economy areinterconnected. Businessmen need to be aware of politicalmovements as well as economic events, since business is seriouslyaffected by politics, especially given the current strategy of setting
up subsidiaries overseas as a key element of business, as suchdecisions could be deeply affected by geopolitical developments.
They will need to adopt a holistic approach to decision making based
upon their analysis and observations of political and economic
trends rather than a segmented approach. All business issues willneed to be considered in the context of political economy.
So in 2017 we devote the first two issues, in January/February andMarch/April, to analyses of this global political economy. For ourJanuary/February issue, we have mainly focused on economists’views of the economy, and it is noteworthy that even economists
today are aware of the need to tackle all economic issues in a politicalcontext.
Among our contributions to the cover story of this issue, we havethe three interviews with distinguished economists at the beginning.
Prof. Barry Eichengreen of UC Berkeley, Richard Koo of Nomura
Securities and the IMF’s Dr. Ranil Salgado introduce their surveys on
the global economy and assessments of macroeconomic policies,
both currently and looking ahead. We also focus on trade policy inthis cover story, based on the assumption that the mainstream
media are correct in saying anti-globalization sentiment is spreading
around the world. Trade policy experts Dr. Mireya Solís, of theBrookings Institution, and Prof. Jota Ishikawa of Hitotsubashi
University strongly advocate for the value of free trade against thistrend and say that protectionism is not an option that should be
2 Japan SPOTLIGHT • January / February 2017

pursued either for a country’s national interest or global interest.
These articles are followed by an interview with Gabriela Ramos,
OECD sherpa to the G20, which introduces the OECD’s view on
global governance, addressing the issue of protectionism and otheranti-globalization policies and how global economic prosperity canbe achieved and sustained.
The three remaining articles cover other important topical issues
in economic policy discussions in the global context. As the qualityof capitalism is being eroded through increasing income inequality,
we started a discussion on the long-term future of capitalism. Howcan we cope with a capitalism that is excessively greedy? If markets
cannot create income equality, is there any other system that could
replace or correct capitalism?
Zlatko Lagumdžija, a distinguished member of European NGO
Club de Madrid which is studying inclusive economic growth,
introduces the concept of “shared societies” in his article, while Jiji
Press journalist Kensuke Karube, a member of our Editorial
Committee, throws a new light on Abenomics by discussing thedifferences from the past in today’s decision-making process ofJapanese economic policy.
We have focused very largely on Asia, Europe and America, but
Africa is not to be underestimated. The African economy has great
potential and could have an impact on the stability and sustainabilityof the global economy. In our interview with Ethiopian Ambassador
to Japan Cham Ugala Uriat, who was very active in the latest TICAD
VI conference in Nairobi, we look at the implications of TICAD for
Africa and the outlook for the African economy.
Given the rise in anti-elitist sentiment around the world, including
Japan, I believe we should improve ways of providing knowledge
and correct information to all people so that voters feel they are wise
enough to make sensible choices at elections, even if they do not likepolitical elites. If people had a better understanding of thebackground to any policy decision made by political elites, it mightalso temper such anti-elitist sentiments.
Naoyuki Haraoka is executive managing director and editor-in-chief of Japan SPOTLIGHTCOVER STORY

1Interview with Barry Eichengreen, Professor of Economics and Political Science at the University of California, Berkeley

Overview of the World Economy in the Short & Long Term

4

By Japan SPOTLIGHT

Increased income inequality creates political problems as well as economic problems. A higher income tax on wealthypeople could be an important measure, and as there would be little correlation between such a tax and economic
growth it would not negatively affect growth.
COVER STORY

2Interview with Richard Koo, Chief Economist, Nomura Research Institute

Traditional Economic Theory Not Working Anymore in Today’s Volatile Economy

8By Japan SPOTLIGHT

As mature economies seek to develop, monetary policy will not be effective in bringing about inflation to pulleconomies out of deflation, but fiscal policy could work in creating demand.
COVER STORY

3Interview with Ranil Salgado, Assistant Director, Regional Studies Division of the Asia and Pacific Department, International Monetary FundThe Global Economy & the Asian Economy — Issues & Challenges from the Short-Term & Long-Term Perspectives

12By Japan SPOTLIGHT

Asia has the potential capacity to be a big player in the global economy in terms of human capital and education level.
But to be more successful, it needs more entrepreneurship.
COVER STORY

4Interview with Mireya Solís, Philip Knight Chair in Japan Studies and Senior Fellow of the Center for East Asia Policy Studies, the Brookings Institution

Free Trade Remains a Hope for Keeping the Global Economy on the Right Track

16

By Japan SPOTLIGHT

Trade liberalization has advanced to a level where it has become indispensable to cultivate the politics of openness at
home, since the line between what is international and domestic is blurring.
COVER STORY

520

Theory & Practice in Free TradeBy Jota Ishikawa

The author argues that many voters who gain from free trade, such as consumers in general, may not turn out to vote inelections, thereby creating a real chance that a candidate opposing free trade is elected.
COVER STORY

6Interview with Gabriela Ramos, OECD Chief of staff & Sherpa to the G20

24

The OECD — the Global “Do Tank” & Its Role in the G20 & G7
By Japan SPOTLIGHT

The interviewee does not believe in a G-zero world and thinks that the G20 has the leverage to deliver on major economic agendas.
COVER STORY

7

Shared Societies for a Global, Inclusive & Sustainable Economy

28

By Zlatko LagumdžijaClub de Madrid, a large European NGO working on achieving inclusive growth, has created the concept of “sharedsocieties” where the needs of all those living in such societies and the surrounding environment must be taken into account.
COVER STORY

8Japanese Economic Policy & Politics

32

By Kensuke Karube

The Japanese political system has been changed under the Abe administration from one where bureaucrats played thepivotal role into one where politicians do so.
COVER STORY

9Interview with Cham Ugala Uriat, Ambassador of the Federal Democratic Republic of Ethiopia to Japan

Africa: a Continent with High Potential to Contribute to Global Growth36

By Japan SPOTLIGHT

The Nairobi Declaration, issued at TICAD VI in August 2016, is providing a good policy agenda for achieving full
exploitation of Africa’s growth potential.
Japan SPOTLIGHT • January / February 20173