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Messages from "Economic Trend", March 2009

Japan Spirit

Yoshinari HARA
Vice Chairman of the Board of Councillors, Nippon Keidanren
Chief Corporate Adviser, Daiwa Securities Group Inc.

Since last fall, major economic indicators have been worsening not only in Japan, but in the entire world at a speed, breadth, and depth that few have experienced. This can be likened to a tsunami generated by a seismic event — the financial crisis in the US — deluging the world economy at one blow.

However, the economy is dynamic in nature. Looking over the current situation, even in this once-in-a-century crisis, one can observe changes that could lead to a recovery. First, global money markets that accelerated the speed of the recent global recession are in the process of growing away from this unusually dysfunctional state. If market liquidity — the lifeblood of economic activities — improves, panic will surely subside. Second, G-20 members confirmed the need for countries to keep lines of trade open and take further economic pump-priming measures last November. China hammered out economic stimulus measures amounting to 4 trillion yuan (about 52 trillion yen), and the US also decided to introduce a fiscal stimulus package centering on tax credits and a "Green New Deal." It is expected that Japan will implement economic measures as soon as possible. Third, in Japan, terms of trade are improving due to the stronger yen and declines in resource prices. The worst risk of concurrent development of inflation and recession seems to have been avoided. In the latter half of this year, conditions required for a gradual economic upturn should emerge.

Nonetheless, the fact remains that looking to the future with optimism is rather difficult. Political and economic issues need to be resolved without delay. These include pension, medical and nursing care concerns, revitalization of regional areas, environmental and resource constraints on sustainable growth, and the severe fiscal position. In addition, the weight of emerging countries such as China and India in the world economy will only increase in the future, which will promote the multi-polarity of the global economy. In these turbulent times, the role that politics can play is significant. It is critical to provide the public with a sense of security and hope by showing an appropriate long-term course for the country. In parallel, we in the industrial community assume a heavy responsibility. Japan possesses various assets such as superb technological capabilities including environmental technologies, abilities to provide fine-tuned services, and ample financial assets. It is our primary responsibility to take concrete action to overcome the issues by utilizing all such assets. It is imperative that we demonstrate Japan's spirit to the world.

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