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Ideal Socioeconomy and Policies for Economic Rebirth(Reference)

July 1999

Economic Planning Agency

Government of Japan

Table of Contents

(Reference)Socioeconomy in 2010

Chapter 1 Socioeconomic Outlook

Part 1 Economic Growth Rate

Part 2 Prices

Part 3 Unemployment Rate

Chapter 2 Citizens Life

Part 1 Job

  1. Workplace
  2. Changes in Labor Markets
  3. Diverse Work Style
  4. Increasing Work Force Rate of Female and the Elderly

Part 2 Learning

  1. Diverse Schools
  2. Recurrent Education

Part 3 Consumption Lifestyles and Leisure

  1. Per-Capita National Income
  2. Disposable Time
  3. Internet Society
  4. Elimination of Domestic-Overseas Price Differentials

Part 4 Families,Regions,and Communities

  1. Strengthening Family Ties
  2. City Designing for Easy Walkers
  3. Communities in Hilly and Mountainous Areas

Part 5 For the Elderly

  1. Elderly Enjoying Consumption Capacity and Free Time
  2. Combination of Public/Private Pensions,Income,and Asset Management
  3. Nursing Care Available in the Community

(Reference) Socioeconomy in 2010

In order to illustrate Japan's socioeconomy around 2010, as described in Section 2, in an easy-to-understand manner, hereafter we provide an outlook of the socioeconomy around 2010, and describe, as specifically as possible, how the lives of citizens should evolve by that time.

Chapter 1 Socioeconomic Outlook

Part 1 Economic Growth Rate

After the economy has recovered to new growth path, growth rate is forecast at approximately 2% per year in terms of "growth accounting", which explains the medium-term real economic growth rate until around 2010 by the sum of capital contribution, labor contribution and technology progress(total factor productivity). It is the sum of approximately 1% of social infrastructure contributions, a little minus contribution of labor and a little over 1% of technological progress contribution. On the demand side, although capital investments will grow at a slightly lower pace than in the past, while capital coefficient is reaching the top, personal consumption is expected to increase steadily while consumption propensity is rising.

Nominal growth rate is expected to be approximately 3.5% per year.

Part 2 Prices

Once the economy is on a new recovery path and supply-demand balances in commodity and labor markets is adjusted, certain increases in commodity prices and wages is expected. Prices stabilizing factor, such as technological innovation and intense competition, is expected to be strengthen in the future. Price increase rate is 2% and a little more in United States under the full employment. (the consumer prices index, excluding food and energy, in 1997 and 1998 rose 2.4% and 2.3%, respectively) Even in Japan, the consumer prices index is expected to be approximately 2% which is moderately lower than recent trends in the United States.

Part 3 Unemployment Rate

There are many factors to increase unemployment rate. For example, accelerated pace of change in the industrial structure due to intensifying competition at home and abroad is expected to expand mismatch among industries and occupation type. Based on this background, unemployment rate is forecast to be late 3%'s to early 4% in 2010. However, it is necessary to strive to reduce this level as much as possible, through appropriate economic management, creation of new employment opportunities, human resource development, upgrading performance evaluation, and reinforcing adjustment function for demand-supply of labor force.

Reflecting structural changes in future labor markets, such as changes in workers' awareness and establishment of a highly accessible labor market, there is potential for voluntary unemployment to rise. Taking such changes into account, the meaning that the level of unemployment has will show different aspects from that in the past.

Chapter 2 Citizens Life

Part 1 Job

  1. Workplace
    (1)Industries and Occupation Type that Grow

    In the context of global competition, it is difficult to envisage which industries will growth to which size. Nevertheless, industries that adapt to the trend of the era described in Section 1 Chapter 1 can be expected to grow considerably. Specific examples include "info-communication network-related industries," which adapt innovations in info-communication technologies of both hardware and software; "nursing-care services," which cater to ongoing aging society; industries that create goods and services that meet the needs of the elderly; and "environment-related industries," which respond to increasing limitations of environmental problems. Employment of these industries is also expected to expand.

    In addition, the low-birthrate and aging trend will continue while the labor population will peak and start declining with developing automation and networking of offices and factories. In this environment, specialist and engineering professions that create diverse intelligence, as well as services professions that cannot easily be replaced by machines, are expected to expand.

    (2)Rejuvenation of New Business Startups

    In the society around 2010, in addition to working in existing corporations, new business startup is expected to become more common. Recently, Japan's new business startup rate was about 4%, which is outstandingly low among advanced countries, given the rate about 14% for the United States and about 13% for the United Kingdom. By around 2010, however, Japanese society is expected to be characterized by new vibrant business startups, similar to the United States and other countries.

    As background of such new business startup activity, an attractive business environment will evolve, and direct investment from overseas will increase with domestic new business startups. In fiscal 1998, the ratio of foreign direct investment to direct domestic investment (on a balance of payments basis) was 5 to 1. By around 2010, this level is predicted to be about 2 to1, approaching to the average level for major OECD countries.

  2. Changes in Labor Markets

    Owing to the establishment of an external labor market and human resource development, as well as upgrading performance evaluation, new labor force allocation, which means the right person for the right job, will be realized with smooth shift of labor force to growth industries, and a new labor force arrangement will evolve, in which resources are found in the most appropriate locations. Limited human resources will thus be effectively utilized. From the perspective of forming a career, more people will change jobs. If this trend of job changing increases, it will be the factor to raise the rate of voluntary unemployment.

    On the other hand, human resource development, upgrading performance evaluation, and reinforcing demand-supply adjustment function in the external labor market should help constrain unemployment and shorten unemployment periods by promoting swift job finding for the open unemployed. Let us take a look at the proportions of the unemployed on the basis of unemployment duration in Japan and the United States via a survey taken in February 1999. Here, we omit the discussion of European nations, where rigidity of labor markets has especially caused the large proportion of long-term unemployed. The length of unemployment terms is affected by economic conditions. It is necessary to take these two issues into consideration that Japan and U.S. are facing different economic conditions and that the level of short-term unemployment rate is higher in the U.S. than in Japan. In Japan, the share of unemployed for less than one month among total unemployed is 12.8%, while those unemployed for more than six months accounted for 44.4% of the total. On the other hand, in the United States, those unemployed for less than five weeks and more than 27 weeks constituted 38.0% and 12.4% of total unemployed, respectively. It shows that the average term of unemployment in Japan is relatively long, but by 2010 it is expected to get shorten.

  3. Diverse Work Style

    Reflecting changes in economic and employment structures and diversification of value perceptions, the working patterns of Japanese workers will also change, leading to an increase those who choose among diverse working patterns, including part-time work, temporary work, and working at home.

    In particular, part-time workers consist certain portion in Japanese labor market in terms of quantity and quality. In the future, they will play much more than auxiliary and temporary roles; those who serve as a core element in the labor force and those who work on a short-term basis as regular employees are expected to increase.

    In addition, working style to work at home using info-communication equipment (such as tele-work and SOHO) will become more prevalent.

  4. Increasing Work Force Rate of Female and the Elderly

    According to estimations by the National Institute of Population and Social Security Research of future Japanese population trends, the total population will peak in 2007 and then start declining with medium variant. The population aged between 15 and 64 peaked in 1995 and has already declined. As the society becomes age-free and gender-free in the future, the workforce rate of the elderly will increase. The workforce rate of females in each age segment will also follow the upward trend. However, overall workforce rate will decline as the portion of the elderly in the workforce increases. Meanwhile, growth in the worker population (based on median variant) will slow down, peaking around 2005 and then decline.

    In 1997, the workforce rate of elderly males (aged 60 to 64) in the United States was around 55% while it is high at 75% in Japan. Accordingly, the workforce rate of the elderly is not expected to grow significantly in the future, but it can be estimated that it will rise above the current level by providing working environment.

    Looking at the workforce rate of female, since some women leave the labor market temporarily to give birth and raise children, there are two peaks-one between ages 20 and 24 and the other between 45 and 49-with down at ages 30 to 34. On the graph, this would produce so-called M-shaped curve. However, by creating environment in which women can work easily, the curve will start to flatten out. Suppose that child-care support measures are widely expanded and the proportion of working women with children less than six years old will rise up to the same level of proportion of those who do not have child-caring responsibility, the workforce rate of women aged 30 to 34 can be expected to rise from around mid 50's % in 1997 to around mid 70's % in 2010.

Part 2 Learning

  1. Diverse Schools

    Uniformity of education will be phased out, and even in schools basic education will be complemented by the appearance of a diversity of schools providing specialized education according to children's individual stages of development. Schools with distinctive characteristics will be created-including schools that nurture sporting, artistic, and other talents, schools that focus on foreign language and information-related education, and schools that are active in entrepreneur education -and a host of curricula will be provided according to each school.

    Recipients of education will enjoy increasing opportunities to select schools according to their needs, and the schools will focus their efforts on meeting the needs of these people.

  2. Recurrent Education

    A lifelong education society will be created, allowing people to freely take advantage of learning opportunities at any stage of their lives, and a recurrent-style life course will become common. For example, the number of people returning to schools having once entered the workforce will increase. In fiscal 1997, the number of people who were selected to enter universities by the method for people in the labor force, not by the general entrance examination, was 4,728 (one per 125 students who entered undergraduate department), while the number of those who were selected to enter grad-school was 6,112 (one in 12 students). As we approach 2010, these numbers of people are expected to rise further.

Part 3 Consumption Lifestyles and Leisure

  1. Per-Capita National Income

    Japan's overall economic growth rate at the beginning of the 21st century will inevitably slow down in the wake of the peak and subsequent downturn in the worker population. Reflecting improved productivity, however, per-capita national income will rise steadily, and people's financial prosperity will improve. Per-capita national income is estimated to rise from 310 million Yen in fiscal 1997 to 350 million Yen (at fiscal 1997 prices) in fiscal 2010.

  2. Disposable Time

    People will seek more spare time in addition to income. Here, we define "disposable time"-overall time minus time which is necessary for life, such as time for sleeping, house holding duties, work and commuting-as an indicator of time-related latitude. As actual working time achieved to be around 1,800 hours per year, "disposable time" will rise steadily as we approach 2010.

    (1)Disposable Time for Average Workers

    In 1996, the total number of work-off days was 120. By 2010, this figure will approach 140, due to further spread of the five-day working week and taking all paid holidays off. This means an increase of 20 days per year that people can enjoy certain amount of holidays for non-work-related leisure activities.

    In the total average commuting time for workers in 1996 was 175 hours (return trips; national average). With the increase of home-based work and satellite offices (small-sized offices set up in suburban areas to reduce employees' commuting hours), this figures is expected to decline to around 135 hours by 2010.

    Due to these factors, the average disposable time for both male and female workers is forecast to rise from 2,150 hours in 1996 to more than 2,300 hours in 2010.

    (2)Specific Examples

    Instead of looking at average level as discussed above, let us discuss specific cases. If people who spend exceedingly long hours for commuting (around 9% of males working in the metropolitan area commute more than 90 minutes by one way) move to live in the central city by compound usage of land, and their commuting time thus falls to 30 minutes bv one way, that gives them extra two hours of disposable time per day.

    Moreover, with progress in child-care services and outsourcing of household duties, women with children will become able to both work and raise children. It also affects to relieve temporarily of their child-caring and to make them to enjoy more free time. For example, with the establishment of day-care services, women who can have their own time away from child-caring will feel refreshed and enjoy hobbies. This will increase their disposable time by several hours.

    Household duties, conventionally mostly undertaken by women, will be shared more evenly between men and women. In other words, men and women will evenly share the times spent on household work, allowing women to have more disposable time and undertake both job and household work. In such cases, both men and women will have shortened working hours, allowing men to have more time for household work without decline in their disposable time.

  3. Internet Society

    Information will flow at high speeds nationwide through Internet. The number of Internet service subscribers will grow significantly from 17 million in fiscal 1998 to around 45 million by about 2010.

    In consumption life, sales of goods and auctions via the Internet will be more common. This form of sales will allow inventories to be minimized thus enabling costs reduction. This will be particularly beneficial to those who sell a large range of goods in small quantities.

    In the office as well, people use computer network for compilation of reports and other internal and external documents , further raising all-round office efficiency.

  4. Elimination of Domestic-Overseas Price Differentials

    Deregulation will help raise productivity in the services industry, while changes in Japanese-style management will lead to a decline in corporate demand. As a result, domestic prices of food, leisure activities -which are high from an international viewpoint-will move closer to overseas prices, thus eliminating domestic-overseas price gaps.

    According to a cost-of-living survey conducted by the Economic Planning Agency, the Tokyo-New York price differential was 1.59 times in 1995, due partly to the yen's appreciation. The differential subsequently declined, to 1.08 times in 1998. Tokyo-Paris and Tokyo-Berlin price differentials in 1998 were 1.15 times and 1.21 times, respectively, in 1998. As such differentials head toward disappearance, people's real living standards will increase.

Part 4 Families, Regions and Communities

  1. Strengthening Family Ties

    Japanese society will shed its company focus-which has created families in which husband is never home and has weakened father-child and marital relationships-and reassess the function of the family, notably "emotional" functions that help bring peace of mind. As a result, family bonds will be strengthened. On the other hand, members of family will have their own personal interest and activity areas, which cannot be adequately gained in the family environment.

  2. City Designing for Easy Walkers

    (1)Comfortable Space

    As rearrangement of existing urban areas will enable more effective usage of land, zone for housing, shopping, offices, culture, and amusement facilities, as well as zone for public facilities such as roads and parks will become more accessible and their quality will improve, allowing more comfortability.

    Average per-capita floor space in residential units, which was 31 square meters in 1993, will rise to the same level as Europe (a little less 40 square meters in the United Kingdom, Germany, and France), facilitating home entertainment.

    In addition, there will be increasing supply of high-quality rental housing for families in city central, as well as rental housing for the elderly and condominium. Meanwhile, the durability of houses (30 years in Japan; 80 to 100 years in the United States, Germany, and France) and improvement of housing function will let market for secondhand residential properties grow. On the other hand, performance specific regulations building standards, as well as development and adoption of streamlined construction methods will help reduce housing construction costs and supply at relatively low prices. As a result, double-income-family with small children will move from their cramped suburban rental house to rental house that are close to their workplaces in the city, while older married couple who have finished their child-caring duties will move to rental housing or condominium which has enough space for two persons in convenient city central. In these ways, people will change residences according to the needs for their job, financial, and family circumstances.

    Railway stations which has difference in elevation more than five meters with 5,000 or more passengers per day will be obligated in principle to install elevators and escalators by 2010. In addition, installation of wide sidewalk, elimination of elevations, and underground installation of electric power lines will continue, while transit malls(pedastrian precincts where only public transportation system can pass) will be widely introduced. This will provide the space for people to enjoy walking.

    (2)Comfortable Time

    Proximity and compoundness of various living space and advanced info-communication networks will reduce traveling time and enhance convenience and efficiency, thus allowing more time comfortableness. For example, environments that facilitate working while raising children will be created. These will include combined design of housing and day-care facilities and day-care centers near railway stations. Meanwhile, public service offices will digitize application forms and provide one-stop services, thus reducing usage time. Advanced information functions will also be installed to road traffic systems, saving toll payments on highways and providing traffic information services along expressways, thus eliminating time losses due to congestion and creating more comfortable time. In addition, informatization of houses will continue, making working style which do not require commuting, such as tele-work and SOHO, easier.

    (3)New Community

    With the creation of more comfortable space and time, people will be able to enjoy more communication with their families. Moreover, more diverse interaction between people and information exchange will be promoted. Individuals are leisurely connected with those of the same hobby and objective, such as cultural activities, amusement activities, sports, NPO. Thus, participate in an open and new type of community. In regional societies, families, regions, companies, cultural circles, amusement circles, sports clubs, NPOs, and other diverse communities will evolve in multilevel. Within this context, broad and harmonious human relationships will be formed, allowing individuals to realize their potential and gain prosperity.

  3. Communities in Hilly and Mountainous Areas

    (1)Diverse Elements Supporting Regions

    Due to progress in transportation and info-communication networks, barriers between hilly and mountainous areas, cities, and foreign countries are lowering, leading to expansion of flow of people, goods, money, and information. As a result, conventional single-unit fixed communities, which were specific to the regions, will evolve into diversified communities in order to express themselves through cultural, sports, travel, health, NPO, and other activities. By contrast, some communities will face drastic population declines in line with ongoing low-birthrate and aging trends.

    In this context, those who support local agricultural and trading industries will interact with those who move from cities to regional areas in pursuit of local attraction. Such regions will then become bases for intellectual exchange and increasingly rejuvenated.

    (2)Industries that Take Advantage of Regional Resources and Knowledge

    New industries, such as the environmental industry-which takes advantage of local natural resources and knowledge-as well as knowledge-intensive industries and the tourist industry, will evolve as source for regional rejuvenation. They will become the new main feature of regional rebirth, attracting local employment accordingly. Moreover, regional areas in general will enjoy improved earnings capacity, thanks to such factors as establishment of child-care facilities, barrier-free roads and buildings, and operation of demand buses. All these factors will makes it easier for women and the elderly to work.

    In addition, the position of corporations, including foreign companies, may change considerably as they seek talented residents in hilly and mountainous areas.

    (3)Daily Life with Access to Urban Services

    Daily life will also change, as living foundations are set up that allow people in the regions to gain access to certain urban services. Even those in remote areas will enjoy improved regional community services, including 24-hour one-stop government and lifestyle-related services, such as through the integration of post office and agricultural cooperative with facilities that has functions of convenience stores.

    In addition, advanced info-communication networks will be established, allowing people to purchase the latest books and CDs in virtual shops at home and instantly gain access to the latest information on overseas economies, arts, and leisure trends, while actively participating in various groups and community activities.

    (4)Vibrant Interaction with Cities

    There will be an increase of people who have second house in the rural area, admiring clean water, air, vast scenery and large houses. Such people will regularly move to live in the area or live permanently. Some of these people will want to take up farming and forest protection activities. For such people, interaction between city people and regional people will be stimulated through support from regional agricultural corporations to enter agricultural business, as well as forest protection activities undertaken by NPOs and others.

    Accordingly, diverse regional communities serving as hubs for interaction will evolve, and the regions will be rejuvenated.

Part 5 For the Elderly

  1. Elderly Enjoying Consumption Capacity and Free Time

    The generation entering old age round 2010 will have experienced prosperous periods of consumption and leisure time in their youth. Since they will have ample resources of both income and time, they will enjoy consumption and leisure time in order to gain personal satisfaction. To this end, they are different from conventional image of the elderly who will receive their pensions and save it for their children and grandchildren.

    As a result of these factors, the savings rate of the elderly in 2010 is forecast to decline compared with current levels. And the proportion of elderly who have relatively low savings rates compared with young people will rise. The result will be a decline in Japan's overall savings rate.

    In this background of strong consumption demand from the elderly, markets for leisure, fashion, information are expected to expand.

  2. Combination of Public/Private Pensions, Income, and Asset Management

    Looking at the income of elderly people around 2010, people will add their public pensions with income from private pension plans which is due to self-supporting.

    Moreover, those who wish to continue working will be able to do so. Continuation of work will help improve the lives of those who decide to work and also provide an income opportunity in addition to public and private pensions.

    We cannot overlook interest and dividend income from savings accumulated to date by the elderly. Methods of asset management will greatly affect income amounts. People will be able choose from a diversity of financial products-from high-risk, high-return products to low-risk, low-return products-and take personal responsibility for the outcome. As a result, specialist asset management services provided by financial planners will become common.

  3. Nursing Care Available in the Community

    Nursing care of the elderly will be a major issue in the aging society. Even today, if families who have members in need of nursing care will give personal care of an elderly person in one's own home leads to enormous time restrictions. Compared to male, who works outside, the burden is tended to be particularly heavy for females. In addition, there are cases where people who do not need to enter a medical facility actually enter a hospital, leading to major inefficiencies in medical treatment costs.

    In the future, the supply of nursing care facilities will rise in response to growing demand for it. Around 2010, the number of homehelpers will rise, leading to the establishment of home-visit nursing care services. As a result, there will be progress in establishment of supply of nursing care services, including those provided by facilities. Accordingly, families who have a member in need of nursing care will be able to select the most desirable form of service.

    In addition, a nursing care insurance system will be established, and from the perspective of cost burden, nursing care previously provided in the home will be provided by society as a whole.

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