報告Keynote Speech by Professor Koichi Hamada
at the 22nd PBFEAM (Pacific Basin Finance,
Economics, Accounting and Management)
Conference at Aichi University,
Nagoya, September 4, 2014*

Koichi Hamada
Yasuo Hoshino
Atsuko Kosaka
Cheng-Few Lee
Motohiko Sato・Address by Professor Motohiko Sato, President of Aichi University
・Address by Professor Cheng-Few Lee, Co-director of PBFEAM Conference・Introduction by Professor Yasuo Hoshino, Co-director of PBFEAM Conference, Professor, Aichi University and Professor Emeritus at University of Tsukuba
・Keynote speech by Professor Koichi Hamada, Tuntex Emeritus Professor＊

We are grateful to Ms Marina Eguchi of the University of Tokyo, for editing thetext of Prof. Koichi Hamada.

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of Economics, Yale University and Professor Emeritus, University ofTokyo, and Special Advisor to the Prime Minister of Japan, Mr. Shinzo
Abe

Professor Kosaka
Good morning, everyone. Welcome to this keynote speech by Professor
Koichi Hamada. My name is Atsuko Kosaka, and I am a faculty member ofAichi University. First of all, I would like to ask President Motohiko Satoof Aichi University to deliver the welcoming address.

Address by Professor Motohiko Sato
This is the 22nd PBFEAM conference, a little bit long abbreviation for me
to deliver. The conference was set by the greatest group of administratorsof our Aichi University. I also welcome our special speaker, Professor
Koichi Hamada, Professor of economics at Yale University and Professor
Emeritus at the University of Tokyo. As you know well, he is also a special
advisor to the Prime Minister of Japan, Shinzo Abe. Well, let me have achance to refer to the history of our university on this special occasion. Our
university was established in 1946 as a private university. However, there isa history of our university even before. Our roots go back to 1901, when aprivate institution of higher education named Toa Dobun Shoin was
founded in Shanghai. While Toa means "East Asia", Dobun means "thesame cultural background", and Shoin means "some kind of educational institution". This institution was established by the Toa Dobun association
which was led by Mr. Atsumaro Konoe who was also President of theHouse of Peers at that time. Located in Shanghai, the institution attracted― 108 ―

Keynote Speech by Professor Koichi Hamada at the 22nd PBFEAM (Pacific Basin Finance, Economics,
Accounting and Management) Conference at Aichi University, Nagoya, September 4, 2014

many Japanese and Chinese students in a climate of academic freedom, imparting them with an awareness of international affairs that paid a particular emphasis on China, Japan and Asia. However, Japan's defeat in
World War II led to the Chinese requisition of the institution, resulting in
the conclusion of the half century of history. Our Aichi University was established mainly by those who worked as academic staff at the institution.
Professor Kiichi Honma, the last president of the institution, played a central role in founding Aichi University. Based also on the educational tradition of Toa Dobun Shoin, our university put a special emphasis on
educating students with a global outlook and with the idea of contributing
to culture and peace. Hosting the 22nd PBFEAM conference as one of the
distinguished academic associations in the Pacific basin region has therefore very important bearings for our university in this connection. Finally,again, I cordially welcome all of you to Aichi University. Please enjoy agood time at our university. Thank you for your kind attention. (Applause).

Professor Kosaka
Thank you very much President Sato. Next is Professor Cheng-Few Lee,a founding organizer of this conference and also founding editor of two famous journals, Review of Quantitative Finance and Accounting (RQFA)
and Review of Pacific Basin Financial Markets and Policies (RPBFMP).
Professor Lee will now deliver his opening speech.

Address by Professor Cheng-Few Lee (Co-director of 22nd PBFEAM Conference)
Good morning ladies and gentlemen, Professor Hoshino and Professor― 109 ―

Hamada, I really appreciate Aichi University that has spent a lot of effort
to conduct this 22nd PBFEAM conference. This conference started in
Rutgers University in 1993 and then came to Asian countries like Taiwan,
Singapore, Hong Kong, Australia, Vietnam, Thailand, China and so on andnext year this conference is going to Ho Chi Minh City, in Vietnam again.
and I will invite professors at PBFEAM to discuss more about this conference. The history of this conference has been raising and raising its programmers. The progress of this conference is about 50 - 60% about academic
and some policy and activity. and hopefully this conference has turned out
to be getting more momentum in future of worldwide economic activity
with an Asian emphasis. This is my second time to visit Nagoya City. Professor Hoshino invited me some 13 .. 14 years back at Nagoya City University and I see the progress has advanced fast in the last 13 years. Finally I
really appreciate professors coming from all over the world attending thisconference and thank you very much.

Professor Kosaka
Thank you very much Professor Lee. This morning we have two keynote
speakers. Our first keynote speaker is Professor Koichi Hamada, I would
like to ask Professor Yasuo Hoshino of Aichi University, who is the Chairof this session, to introduce Professor Hamada.

Introduction by Professor Yasuo Hoshino (Chair, co-director of the 22nd
PBFEAM, Professor at Aichi University & Professor Emeritus University ofTsukuba)Thank you very much, Kosaka-sensei. We Japanese use family names
among our faculty members in Japan. Many foreign people here use first― 110 ―

Keynote Speech by Professor Koichi Hamada at the 22nd PBFEAM (Pacific Basin Finance, Economics,
Accounting and Management) Conference at Aichi University, Nagoya, September 4, 2014name usually. It is quite unusual to use first name among Japanese, So, I
would like to use family names, like Kosaka-sensei, Hoshino Sensei (laughter), first name is used only for close or personal relationships (laughing).
Well, Kosaka-sensei, thank you so much. Now, I would like to introduce
Professor Hamada, I have some slides here to show. Professor Koichi
Hamada is Professor Emeritus at Yale University, and at the same time at
the University of Tokyo. Professor Hamada is Tuntex Emeritus Professorof economics at Yale University, where he specializes in the Japanese economy and international economics, and Professor Emeritus at the University of Tokyo, where he taught before coming to Yale. Professor Hamada
is Professor Emeritus at two very famous universities in the US and Japan.
I am Professor Emeritus only at University of Tsukuba, just one. (Laughter). He is now also Special Advisor to the Prime Minister of Japan, Shinzo
Abe and also he is considered to be the pioneer of Abe's economic policies,"Abenomics" (Abenomikusu) refers to the economic policies advocated by
Shinzo Abe since the December 2012 general election, which elected Abe tohis second term as Prime Minister of Japan.

Professor Hamada did his Ph. D. in Economics from Yale University.
Professor James Tobin and Professor Tjalling Koopmans were members of
his Ph. D. dissertation committee, both received, later the Nobel Memorial
Prize in Economic Sciences. So we Japanese hope that he will receive it in
the near future. Professor Hamada was on leave from Yale University toserve as the first President of the Economic and Social Research Institute(ESRI), Cabinet Office of the Japanese Government. The ESRI engages inpolicy-oriented research and compiling the GDP statistics. Professor
Hamada was in a position to advise the Council on Economic and Fiscal Pol-― 111 ―

icy (CEFP), a body created to promote the administrative reform chairedby the Prime Minister. And he was the founding President of the Japan
Law and Economics Association from 2001 to 2003 (now its honorary fellow). In 2006 Professor Hamada was awarded with the imperial decoration,
the Order of the Sacred Treasure, Gold and Silver Star, 'Zuiho-sho' we say
in Japanese, which is given to those who have accumulated distinguishedachievements for Japan. Professor Hamada is the foreign fellow of the
Econometric Society: An International Society for the Advancement of Economic Theory in its Relation to Statistics and Mathematics. Professor
Hamada served as President of the Japanese Association of Economics andEconometrics (now the Japanese Economic Association) from 1994 to 1995.
This is the largest social science association in Japan. Professor Hamada isalso the founding President of the Japan Law and Economics Associationin 2003 (now its honorary fellow). Professor Hamada also serves as one of
the associate editors for many journals including Econometrica, Journal ofInternational Economics, Journal of Economic Theory, Journal of Public
Economics, Journal of Development Economics and Journal of the Japaneseand International Economies. His books in English after 2007 include; Financial crises in Japan, Ageing and the Labour Market in Japan: Problems
and Policies, Towards Monetary and Financial Integration in East Asia,
and Japan's Bubble, Deflation and Long-term Stagnation. Now, Professor
Hamada please. (Applause).

Keynote speech by Professor Koichi Hamada (Tuntex Emeritus Professor of
Economics at Yale University & Professor Emeritus at University of Tokyo,
Special advisor to the Prime Minister of Japan, Mr. Shinzo Abe)Good morning ladies and gentlemen, I am very pleased to meet my old― 112 ―

Keynote Speech by Professor Koichi Hamada at the 22nd PBFEAM (Pacific Basin Finance, Economics,
Accounting and Management) Conference at Aichi University, Nagoya, September 4, 2014

friend Yasuo Hoshino and speak here at this conference mainly about thepresent economic policy in Japan. Yasuo reminded me of our friend andmentor Professor Kazuo Sato of Rutgers. He was from Hokkaido. I went toYale Graduate School after his stay and he gave me advice on schooling at
Yale. Most of all, Kazuo Sato taught me that rather than collecting good
grades, an economist should try to discover new perspectives and try toconvey them clearly. First of all, this gathering is a Pacific Basin Finance
Economics, Accounting and Management conference. So this meeting is notnecessarily about economics but also about accounting, management and soon. Before I go to topics in economics, let me talk about my study life andwhy I had not obtained good knowledge of accounting in my life. I went to
the University of Tokyo and was told that in accounting classes if you
make calculating mistakes, you will get B or C. I avoided it as I was scaredof making calculating mistakes. Professor Richard Ruggles who was theadvisor to Kazuo Sato, taught National Accounting at Yale Graduate
School but I skipped his course, So I got Ph. D. in economics without taking
any courses in accounting. But I regret this now. I should have taken accounting courses very seriously because accounting is very important inunderstanding economics. This discipline is based on the information aboutbusiness. Nowadays we study asymmetry of information that is the scienceof cheating. One cannot know how to negotiate without information about
economics and accounting. The work of Stiglitz and Akerlof show thatstudy of information is the crucial field where economic science is making
pioneering progress. I should not have worried about grades in accounting.
Another thought on the topic is the stock market. I will talk about how thestock market in Japan is helping the recovery of the current Japanese economy. However, my comments are restricted by being a special advisor of― 113 ―

Prime Minister Abe. As an official in the US Treasury told me, I should nottalk about the market price or rate which I might have a slightest influencein the future. So this is my personal opinion. I may convey my view to thePrime Minister, but it is independent of the Government policies, particularly the new government. The Lehman crisis took place in the US, the UK
and Europe. Their economies plunged about 4 or 5 percent. On the other
hand, the Japanese GDP fell down as much as 7 or 8 percent. This contrast
was true despite of the fact the Japanese financial industry was not affected much by the Lehman crisis. The reason is that the Japanese GDP
was seriously affected by the yen appreciation that came like a Tsunami by
the enormous monetary expansion of central banks abroad. The Japanesemonetary policy makers reacted to stabilize its financial market, but kept
the yen very expensive. By Abenomics, monetary policy was expanded, theyen was moved more depreciated, and the interest rate was lowered to almost zero. Unemployment became close to three percent. The job offerapplicant ratio became over unity. Firms like Yoshinoya found it difficult
to recruit new applicants. The Bank of Japan expanded supply of money tothe economy. Employment improved drastically, firms' revenues became
historically high, and even tax revenues dramatically improved.
Now it is time to look at the supply side in the same way. Structural reforms in industries, and deregulation are needed but they are difficult toimplement because there is resistance from those who enjoyed power, benefits from existing inefficiency. There are so many systematic difficulties
with the supply side. Stronger growth of supply side is not straightforward. We cannot catch up to the advance technology as we could do 20
years ago by the industrial policies. No longer, Japanese management
maintained the growth rates. However, probably I should say that the― 114 ―

Keynote Speech by Professor Koichi Hamada at the 22nd PBFEAM (Pacific Basin Finance, Economics,
Accounting and Management) Conference at Aichi University, Nagoya, September 4, 2014

stock market is important in Abenomics, the opponents of Abenomics saythat a monetary stimulus does not work because people accumulate somuch money in their pocket. So additional money would not stimulate
spending. Then BOJ Vice-Governor Iwata said that if people know that inflation is coming, they will know their cash will depreciate in value and andthen they will start spending. So there is a real balance effect. The third
arrow is a structured policy and there are also relevant to the stock market.
The rest of the structured policies are basics. About one year ago Mr. Abe
was addressing the Diet and explaining each item of these structural policies, that is, reading the manuscript wrote, the stock market started to decline. I joked that the first arrow should be given a grade A. For the second
arrow, I have some reservations to the government spending, I might givea grade B, and for the third arrow have so many reluctances but I couldn't
give F, failure, so I give a grade of E (Laughter). So ABE completes the theory. Back to the third arrow. There are so many difficulties and I will discuss some of these. The first thing is industrial policy. Hopefully, we canmanage by giving some subsidies and they see the growth because it was
the time when the automobile industry had the future and in the long termthat was partially successful. However, these kinds of measures can havesome political economy-wise problems that the greater benefit for one industry can be captured by a greater loss to others. You give greater subsidies to a particular sector and at the same time you may get somebalancing effect by shooting some other industries. So this type of policy
which cannot help so much deregulation is important, but many bureaucrats enjoy the power of control. So they don't want to give up. Japanesebureaucrats push Japanese sunrise government for protection, so the structural reforms, first of all, should be deregulation. But at the same time be-― 115 ―

cause the steps are to be taken by bureaucrats it has political difficulties.
The deregulation is conducted mainly by bureaucrats. Therefore, deregulation is a process that group of samurai warriors give up their robe (yoroi)that is so comfortable to them. The only hope is that Mr. Abe and cabinet
secretary Mr. Suga are very eager to accomplish this. They have madeenough of necessary legislations for reforms during the first half of theyear. So they are serious to do reforms and that is the hope for the economy. The problem is to find out what government need not to do. There aremany stories. For instance medical school is recently approved but the restof the medical schools were approved 34 years ago, and in 34 years many
clinical progress has been made. So the bureaucracy confined the way of
producing doctors, who were very talented by preventing to increase thenumber of doctors, so there is problem of the lack of doctors for the population. TPP is sort of in danger of disappearance in the US. It would improve Japan's trade prospects considerably, including sensitive sectors like
agriculture, where exporters of fast-moving consumer goods like flowers
and vegetables would benefit. We have flower industry in Aichi that is thebest export industry of the prefecture. Holland has a leading example inflowers with long history of tulips. And vegetables are not protected by theGovernment. Yet they are indispensable in making excellent Japanesecuisines. In the large, they are export from Japan. About the population
growth, still women are great resource. Legislation is still biased thatwomen who are at home serving her husband and taking care of her children are subsidized. For children as well, isn't it better to be parented bymothers who have social and working experience? About the corporate tax.
See the illustration. (Referring to slide 12) This is in English: Effective rateof corporate tax rates in several countries, Japan first, then the US,― 116 ―

Keynote Speech by Professor Koichi Hamada at the 22nd PBFEAM (Pacific Basin Finance, Economics,
Accounting and Management) Conference at Aichi University, Nagoya, September 4, 2014

France, Germany, China, (Seoul) Korea, England, and Singapore. So andthe most important finding is that the lowest one is Singapore, and the second lowest is England in this figure, China, Korea and so on. The US ishighest but it depends on the states. Japan has the highest corporate tax
rates. In my first paper, I wrote that there is an element of game in the tax
competition. The point is that if the country tries to reduce taxes, it will
have some competitors. So England had a very high corporate tax, but now
it has started some tax wars. This may work for Japan, which needs to reduce drastically, not one percent each time, to give incentives or so to theinvestors. Then there will be shifts in investments. So if Japan reduces 1%of the corporate tax rate, it doesn't mean that investments will come to
Japan, or that the Japanese investors investing in other countries will comeback. But still it is a measure that government can use. For instance, if thegovernment reduces the corporate-tax rate to align it more closely with international standards, amid increasingly intense international competition
to attract foreign investment, reducing the corporate tax would actually increase Japan's tax revenues, by spurring companies to invest their vast
cash stockpiles in more productive activities. While bringing investment issomething that will not increase the demand side, it will increase the supply
side, and that is the reason why I advocate this. One thing regarding the demand side is that the population growth in Japan is very slow. One relatively simple solution would be to integrate more women into the labor
force. That's what I have explained quantitatively. Suppose that 20 percent
of women come to work after child birth. A 10 percent increase in Japan's
female labor-force participation rate would be translated into an almost 5
percent gain in total labor-force participation. Unfortunately, you cannot
continue this for a long time and something will come from outside, proba-― 117 ―

bly immigration. Immigration is something that is most logically following, but it may not be compatible with Japanese sentiment. So we need towork to expand the labor force step by step. And depending on your time,scheduled time, now I will take questions.

Professor C. F Lee: I think this is a very interesting talk and combined withpractice this essentially will go with our Journal, Review of Pacific Basin
Financial Market and Policies, and I hope you can put it on paper, andprobably you will make a leading article in my journal, I hope.

Professor Hamada: Yes, I hope.

Professor Lee: And in addition I would like to say that in our Pacific Basin
Journal we are really set for more on the Policy and Market interaction,even US research and more into macro finance research. So I really enjoy
your talk. Thank you.

Professor Hoshino: Any questions, or comments from the audience?

Question from the Audience: Thank you very much. I enjoyed your talk. I
wonder whether you will recommend increasing the consumption tax to 10% next year. Do you have any advice for Mr. Abe?

Professor Hamada: Are there some people from the media here?

Professor Hoshino: No, I don't see any media. (Laughter)― 118 ―

Keynote Speech by Professor Koichi Hamada at the 22nd PBFEAM (Pacific Basin Finance, Economics,
Accounting and Management) Conference at Aichi University, Nagoya, September 4, 2014

Professor Hamada: I think this year, this second quarter is the combinationof up and down shocks so that it is not the best time to decide. This is mypersonal opinion and I don't know what Mr Abe is thinking. So if the third
quarter GDP stays slow, we can postpone this 10% raise or we can make it
one by one, say, next April one percent, after one and a half years, say, 10%.
My interest is now shifting to corporate tax, because lowering the tax canbring more FDIs to Japan when the world is engaging in tax wars. Korea,
for instance, will be going for a drastic cut in corporate tax. The current
corporate tax rate is so high in Japan. The second highest among the large
seven nations. If we go a few more years with the high level of corporate
tax it will raise concerns. Reducing the corporate tax would actually increase Japan's tax revenues, by spurring companies to invest at home. Consumption tax has a less demand elasticity, say, for instance, if you increase
one percent consumption tax on hamburger then people will reduce the consumption much less.

Question from the Audience: I am not so interested in what Mr. Abe will say
but specifically along the lines you discussed about the tax increase further,
they have the Abenomics suffering, right now, because Japanese people understand it's a kind of major contradiction like make a small increase andif it fails to recover then next year will increase it further, till three years.
So it continues like that. But Japanese people know how the tax revenue
continues to shrink every year, because if it continues to be shrinking it
will make the economy suffer a lot.

Professor Hamada: The Japanese finance ministry has a special accounting
system. It's the pool of tax revenue that always remains constant. So if we― 119 ―

do this calculations of consumption tax rate it will circulate revenue as
given amount of tax rate given by the system behind. So it may not the direct answer to you. But Ministry of Finance should stop thinking of forgetting economics. They get the old brightest university graduate, or they use
to do so, and so they should stop ranking it on that system. So, I will rathersay, we should instead of looking at the consumption tax issues shifting
our attention to cooperate tax is much more important. For example, special tax measures that each company are given, some special measures,some of them are given because of the employment, because of technicalreasons. They also give power to the bureaucrats. So Ministry of Financeshould also change that kind of things. Anybody can answer, I have actually, I was raised in the theoretical field and all the numbers of the US were
calculated by my colleagues or some assistants. But US numbers were notvery different from Japanese numbers, until 2012, the Japanese economy
was very slow thus the rate of corporate tax was very low, and the Ministry of Finance says that corporate tax is not the place where we should
avoid our tax.

Professor Hoshino: Ok, next question.

Question from the Audience: Thank you very much Professor Hamada forthe talk. I am from Keio University, Institute of Energy Economics ofJapan. The Bank of Japan has about 2 percent inflation targeting. Until
now about 1.2 percent is achieved. Do you believe how many percent, howmuch portion of this percentage is because of easy money of monetary policy, and how much portion of this percentage is because of high energy
prices.

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Keynote Speech by Professor Koichi Hamada at the 22nd PBFEAM (Pacific Basin Finance, Economics,
Accounting and Management) Conference at Aichi University, Nagoya, September 4, 2014

Professor Hamada: The general price increase is more related to the monetary policy abstractly. In a very abstracted sense, your question should beanalyzed more carefully in terms of many things, in terms of exchange
rates, consumption tax rate, and expectations. I do not think hitting an inflationary target is very important.

Professor Hoshino: Could we have the last question?

Question from the Audience: The actual problem that Japan suffering is, as
number one, I would say, is low rate of birth. The population of Japan is
declining tremendously and its a matter of 200 years before the nation ofJapan will become extinct. (Laughter) I am to say that, I want to hear,
what do you want to suggest regarding this apparent social issue and thegovernment human policy and economy of society that have worked on thisissue. I will be happy if you give some of your ideas.

Professor Hamada: This is a joke by Columbia Prof. David Weinstein, thatJapan will be extinct by 20 -- (Laughter). However, women constituteabout half of the population, so that a 10 percent increase in participation
would make a significant short term solution for the working force.

Professor Hoshino: Thank you very much. I think that is about all for thissession. Now we will go for the photo session, please.

Reference
Cheng-Few Lee, Yasuo Hoshino, and Mohd Fazli Mohd Sam, Review of Pacific Basin Fi-― 121 ―

nancial Markets and Policies , 1596001 (2015) [15 pages] https://doi.org/10.1142/
S0219091515960016― 122 ―

Keynote Speech by Professor Koichi Hamada at the 22nd PBFEAM (Pacific Basin Finance, Economics,
Accounting and Management) Conference at Aichi University, Nagoya, September 4, 2014

1

CONTINUING THE
SUCCESS OF
ABENOMICS
Presentation by Koichi HamadaSpecial Advisor to the Cabinet, Japan,
Aichi University, September 4, 2014

2

Caveat• I will present my own personal views here that is

independent of the current policy positions of theJapanese government.

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3

PBFEAM• Accounting• (1) in my life,• (2) as a cradle of an asymmetric information,• (3) as a part of government reform.
• Kazuo Sato as my mentor.

4

Three Arrows• Motonari Mohri, Daimyo of Chugoku District where thePrime Minister was born, gave an arrow to each of hischildren asked told them to break it which they did easily.
He then told them to tie the arrows together and try to
break them, --- it was difficult --- thereby demonstratingthat “cooperation” would make the bond stronger.
• And so the “three arrows” of Abenomics are meant towork in co-operation. They are:• (1) Bold monetary policy;• (2) Flexible fiscal policy; and• (3) Strategies to promote growth.

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Keynote Speech by Professor Koichi Hamada at the 22nd PBFEAM (Pacific Basin Finance, Economics,
Accounting and Management) Conference at Aichi University, Nagoya, September 4, 2014

5

Relationship between the Arrows• Arrows are not necessarily parallel, but connected bystructural relationships:• (1) Monetary policy, the first arrow, is effective when deflationand the high yen leave excess capacity in the economy. This
arrow already hit the bull’s eye!
• The asset markets, stock and the yen immediately
responded.
• Monetary ease was successful through real balance effect,
portfolio rebalance (Tobin’s q) and acceleration effect in thecredit channel.
• Already it is working effectively through to goods, and labormarket.
• High economic growth rate of 4.1% (1st quarter), 3.8% (2ndquarter) and improvement of labor (offers/applicants) ratio toover 0.9 are indications of success. <Display 1 and 2>

6

Important to note
(1)The first arrow is unusable, for example, in the Euro aria.
Mobility of laborand capital can mitigate the difficulties.
Banking Union may be only partially helpful.

(2)The currency war under the flexible rates is a fallacy!

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7

The First and Second Arrows (continued)• As long as there is excess capacity, easy money works

even without growth strategy (the third arrow). When theeconomy hits the level of full employment, then money
does not increase output or employment and may trigger
inflation.
• (2) Fiscal Expenditures, the second arrow, are necessary
to maintain the quality of public services. As Robert
Mundell shows, however, under the flexible exchange
rate, the role of this second arrow is quite limited if notaccompanied with accommodative monetary policy.

8

The Third Arrow• (3) Growth Strategy, the third arrow, will enhance the full

employment capacity growth path through structural reforms,
technological innovation, TPP (Trans-Pacific Partnership) andcorporate tax policy.
• Expectations of the the third arrow---Growth Strategy• The Old Fashioned MITI type Industrial Policy --- No! WhenJapan operates at the frontier of industries, the government
can’t choose the winners.
• Exceptions are when externalities and public goods exist.
There is a strong case for the carbon tax.
• Mainly, growth strategy is hidden in competition and markets---along the Koizumi-Takenaka regulatory reform lines.

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Keynote Speech by Professor Koichi Hamada at the 22nd PBFEAM (Pacific Basin Finance, Economics,
Accounting and Management) Conference at Aichi University, Nagoya, September 4, 20149

From Wishful Thinking toWhat Government Can unDo
Now
• To encourage investment in the Japanese economy,rather than “wishing to the stars”, consider what the
government can do right now, for example:• (i) Deregulate,• (ii) Participate in the TPP, and• (iii) Reduce the corporate tax burden, or introduce thesystem to encourage investment such as accelerated
depreciation, and a longer loss-offsetting period.
• The pursuit of the third arrow without the first may be evendeflationary.

10

Appendix: Regarding Tax Competition of
Reducing Corporate Taxes• Government has a large deficit, playing a “civilized” Ponzi

game. But the Ministry of Finance highly exaggerates it home
and abroad.
• The effective corporate tax rate is higher than abroad. (Display
3) In order to survive tax competition, corporate tax burden
should be lowered.
• Any tax raise will be accompanied by allocative deadweightlosses. Among The consumption tax may be the least harmful.
However, the right timing of consumption tax hike is important
not to suffocate recovery. I raised my reservations but the
government decided to go forth because of the recent rapid
recovery.
• As long as monetary policy through exchange and stock
market is effective, I hope the recessionary effect of the hikewill be limited.

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11

12

International Comparison of The Effective
Corporate Tax Rate (January,2013)

Source: Ministry of Finance Japan Data(Japanese Only)䋨http://www.mof.go.jp/tax_policy/summary/corporation/084.htm䋩

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Keynote Speech by Professor Koichi Hamada at the 22nd PBFEAM (Pacific Basin Finance, Economics,
Accounting and Management) Conference at Aichi University, Nagoya, September 4, 201413

Deflation Gap

Source: Cabinet Office, Topics of Economic Indicators(Japanese only)
http://www5.cao.go.jp/keizai3/shihyo/2013/0912/1079.html― 129 ―

― 130 ―