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Former Governor of Japan’s Central Bank Spoke at NSD

Nov 15-2023   



On November 10, 2023, Mr. Masaaki Shirakawa, former Governor of Bank of Japan, delivered a keynote speech entitled Ending of High Growth: Experiences of Japan and Implications for China. His was the second in the Central Bank Governors’ Lectures Series, part of Langrun Policy Talk, a signature event of the NSD.

 

Recently, some western scholars and media have likened China’s current economic conditions to those of Japan in the 1990s and gone so far as to conclude that the Chinese economy is undergoing Japanification, a byname for Japan’s ecnomic recession period commonly known as the ‘Lost Two Decades’. In his speech, Mr. Shirakawa traced Japan’s development experiences and compared them to China’s, before giving his advice.

 

To transition from rapid growth to stable growth naturally constitutes a daunting task for an economy, he said. Similarities do exist between today’s China and 1990s’ Japan. Both have experienced decades of fast growth; both are deemed to on course to overtake the US to become the world’s largest economic body and therefore are viewed by the US as a threat; in trade and investment, they have irreconcilable frictions with the US; both are confronted with fast population aging and a declining fertility rate; and both grapple with low inflation or minor deflation.

 

Despite so, western scholars’ analyses and interpretations of the Japanese economy tended to stray from Japanese realities, which in turn has misled many Chinese experts, said Mr. Shirakawa. He has worked for four years and published a book recounting Japan’s fall from a booming economy to recession and offering references and reflections for researchers.

 

One factor that contributed to Japan’s stagflation was an overconfidence in the domestic economy, which resulted in inability to discover risks in time and take countermeasures, he said. Another cause lay in Japanese government’s promise to reduce current account surpluses by expanding domestic demand. Moreover, Japan’s various circles mistakenly requested the Central Bank to carry out loose monetary policy. When Japan’s economic bubble burst, no proper measures were promptly taken.

 

He believed China differs from Japan in that it has several advantages: China’s status and weight in the global economy and trade far exceed Japan’s at the end of the 1980s; China actively embraces the innovations and applications of new technologies; and the Chinese government is very strong in action and execution.

 

He advised that China should first and foremost avoid the overconfidence plaguing Japan, uncovering risks as soon as possible and adopting prompt measures. The central bank of China should go to lengths to safeguard the stability of the financial system; unless low inflation or minor deflation affects the stability of the financial system, the monetary policy shouldn’t be hastily relaxed, he suggested. With regard to the population, he proposed improving the pension system, enhancing senior resident’s labor participation, and providing comprehensive social support for child-rearing in order to increase the fertility rate.

 

Prof. Huang Yiping, NSD Deputy Dean and Director of PKU Institute of Digital Finance, hosted the event. Having known Mr. Shirakawa for years, Prof. Huang expressed admiration for his efforts to rectify western misunderstandings of ‘Japanese lessons’. Superficial or incorrect understandings of the Chinese economy have also put down root among some western scholars, said Prof. Huang, believing that Mr. Shirakawa’s lecture would help deepen understandings of Japan’s experiences and facilitated reflections on what China is currently going through.

Former Governor of Japan’s Central Bank Spoke at NSD

Nov 15-2023   



On November 10, 2023, Mr. Masaaki Shirakawa, former Governor of Bank of Japan, delivered a keynote speech entitled Ending of High Growth: Experiences of Japan and Implications for China. His was the second in the Central Bank Governors’ Lectures Series, part of Langrun Policy Talk, a signature event of the NSD.

 

Recently, some western scholars and media have likened China’s current economic conditions to those of Japan in the 1990s and gone so far as to conclude that the Chinese economy is undergoing Japanification, a byname for Japan’s ecnomic recession period commonly known as the ‘Lost Two Decades’. In his speech, Mr. Shirakawa traced Japan’s development experiences and compared them to China’s, before giving his advice.

 

To transition from rapid growth to stable growth naturally constitutes a daunting task for an economy, he said. Similarities do exist between today’s China and 1990s’ Japan. Both have experienced decades of fast growth; both are deemed to on course to overtake the US to become the world’s largest economic body and therefore are viewed by the US as a threat; in trade and investment, they have irreconcilable frictions with the US; both are confronted with fast population aging and a declining fertility rate; and both grapple with low inflation or minor deflation.

 

Despite so, western scholars’ analyses and interpretations of the Japanese economy tended to stray from Japanese realities, which in turn has misled many Chinese experts, said Mr. Shirakawa. He has worked for four years and published a book recounting Japan’s fall from a booming economy to recession and offering references and reflections for researchers.

 

One factor that contributed to Japan’s stagflation was an overconfidence in the domestic economy, which resulted in inability to discover risks in time and take countermeasures, he said. Another cause lay in Japanese government’s promise to reduce current account surpluses by expanding domestic demand. Moreover, Japan’s various circles mistakenly requested the Central Bank to carry out loose monetary policy. When Japan’s economic bubble burst, no proper measures were promptly taken.

 

He believed China differs from Japan in that it has several advantages: China’s status and weight in the global economy and trade far exceed Japan’s at the end of the 1980s; China actively embraces the innovations and applications of new technologies; and the Chinese government is very strong in action and execution.

 

He advised that China should first and foremost avoid the overconfidence plaguing Japan, uncovering risks as soon as possible and adopting prompt measures. The central bank of China should go to lengths to safeguard the stability of the financial system; unless low inflation or minor deflation affects the stability of the financial system, the monetary policy shouldn’t be hastily relaxed, he suggested. With regard to the population, he proposed improving the pension system, enhancing senior resident’s labor participation, and providing comprehensive social support for child-rearing in order to increase the fertility rate.

 

Prof. Huang Yiping, NSD Deputy Dean and Director of PKU Institute of Digital Finance, hosted the event. Having known Mr. Shirakawa for years, Prof. Huang expressed admiration for his efforts to rectify western misunderstandings of ‘Japanese lessons’. Superficial or incorrect understandings of the Chinese economy have also put down root among some western scholars, said Prof. Huang, believing that Mr. Shirakawa’s lecture would help deepen understandings of Japan’s experiences and facilitated reflections on what China is currently going through.