Address urgent social woes without delay

COVID-19 vaccinations have finally begun in Japan. But the threat of a fourth wave of the pandemic looms closer. The novel coronavirus ordeal, which is already in its second year, highlights anew a variety of economic and social challenges Japan has chronically faced with no solutions.

European countries, the United States and a few other countries have expedited the development of COVID-19 vaccines as a game changer in their fight against the infectious disease. To attain success in the quest to make vaccines as quickly as possible, the countries concerned must have the capability to collectively mobilize high levels of life science expertise and promptly facilitate a highly advanced research and development system.

A handful of countries, including Britain, the United States, China and Russia, among a few others, have so far been successful in developing and producing COVID-19 vaccines at home. Unfortunately, no COVID-19 vaccines have been developed yet in Japan. Therefore, Japan has to rely on imports of vaccines to get its population inoculated, struggling to ensure that it will be able to receive enough supply of doses from abroad.

In February, Japan started its COVID-19 vaccination rollout, covering health care workers first. But the total number of vaccination doses administered per 100 people in Japan’s overall population was a mere 0.5 as of March 22.

As such, Japan lags far behind Israel — which has already recorded the world’s highest vaccination rate of 107.0 doses per 100 people — as well as Britain (44.7), the United States (37.5), Spain (12.7), Germany (12.6) and France (11.8). Japan’s latest vaccination achievement accounts for less than one-tenth of that in Russia (5.8) and China (5.0).

To facilitate the smooth implementation of the vaccination program across Japan, the central and local governments need to cooperate in installing a nationwide data system capable of tracking people eligible to receive COVID-19 vaccinations. Such a system yet has to be completed.

The My Number card the government launched in 2016 as an across-the-board identification system could have been effective in realizing the nationwide COVID-19 inoculation program. In reality, only about a quarter of the people residing in Japan have obtained a card to date, meaning that it is not functioning as an across-the-board identification data system.

As for electronic medical records, Britain and Nordic countries had their health care records fully computerized as of 2016. Even today, the digitization rate of medical records in Japan stands at 46.7%, according to the Health, Labor and Welfare Ministry. In other words, vaccination programs are tantamount to a yardstick to gauge each country’s overall competence in going digital.

In the past year, though health care workers continued to be devoted to their professional mission, Japan continued to face a possible collapse of its medical system. In July 2020, hundreds of nurses at a main hospital were on the verge of quitting en masse, in a successful bid to compel its management to revoke a decision to suspend a regular midyear bonus payment due to a decrease in hospital revenues.

The truth is that Japan has an exceptionally larger number of hospital beds per capita than other advanced countries. As of 2017, the numbers of hospital beds per 1,000 people stood at 2.5 in Britain, 2.8 in the United States, 6.0 in France and 8.0 in Germany, compared with 13.1 in Japan.

Why is Japan talking about a scarcity of hospital beds even while it has a far larger number of hospital beds per 1,000 people and fewer COVID-19 infected people in serious condition than in many other countries? The spread of the coronavirus has exposed one of the flaws of the country’s health care system — the shortage of hospital beds for patients with acute ailments like COVID-19 infections. In fact, even now hospital beds available to coronavirus patients account for only 3.4% of the nationwide total of hospital beds.

An economic slowdown caused by the pandemic has been negatively affecting the economically and socially vulnerable in particular. This is a phenomenon not limited to Japan, but apparent in every recession. This time, the situation has been undoubtedly exacerbated by the spread of the coronavirus disease coupled with the worsening of income inequality.

In Japan, to protect employment amid the COVID-19 pandemic, the government is applying the decades-old employment adjustment subsidy scheme to employers to partially cover the cost of putting employees on paid leave while temporarily shutting down operations. This emergency program is aimed at keeping as many workers as possible from losing jobs.

In the United States, the unemployment rate soared from 4.4% in March 2020 to 14.7% in April 2020 in the wake of the outbreak of the pandemic. At the time, Japan’s jobless rate remained as low as 2.8%, thanks largely to the government’s subsidy scheme. In that sense, the system’s merits can deserve appreciation.

The employment protection program was introduced in 1975 when the Japanese economy was struggling to survive the first oil shock. Its original purpose was mainly to rescue regular workers employed by large-scale manufacturing companies. The economic slump caused by the coronavirus pandemic began bringing economic hardship to a large number of non-regular workers at small and midsize firms in the food service and tourism sectors, among others. But it became apparent that no existing systems were sufficient to rescue those non-regular workers.

Therefore, in 2020, the government adopted a new scheme to support non-regular workers, who are not entitled to receive paid leave from employers during their workplaces’ shutdowns, by paying subsidies directly to them. The new scheme, which was initially applied to non-regular workers at small and midsize firms, became applicable to non-regular workers at large companies as well in February this year.

It is true that Japan’s social welfare systems, including not only the employment adjustment subsidy program but also the pension, health insurance and long-term care insurance schemes, have been in place on the assumption that they are provided to regular workers. The Labor Force Survey of the Internal Affairs and Communications Ministry shows that non-regular workers accounted for 37.1% of the overall workforce in 2020, compared with 16.4% in 1985. Introducing a social safety net for non-regular workers has been a long overdue issue the country should address.

In April 2020, the government decided to pay out ¥100,000 per capita as an emergency economic measure, costing a total of ¥12.8 trillion. The cash benefit should have been paid only to those really in need. But, as it was decided it would take too much time to choose the right recipients, the government went ahead with the plan as a special across-the-board stimulus measure, remitting ¥100,000 to everyone in the country. The government now should set up a My Number card-based nationwide data system to ensure that it will be able to know who should benefit from any future monetary disbursement.

Japan’s general account budget for 10 years or so after the collapse of U.S. investment bank Lehman Brothers in 2008 kept amounting to about ¥100 trillion, including original and supplementary spending plans, each year. However, the annual budgetary total was brought to a new dimension as it swelled to ¥175 trillion in fiscal 2020 as the government introduced three supplementary budgets in the year. The unprecedented rise in the scale of the budget can be said to have been inevitable, considering that it was a fiscal obligation to prevent income inequality in our society from worsening amid the COVID-19 pandemic.

That said, the government should have kept pursuing fiscal consolidation under normal circumstances so that it would have been able to cope better with a crisis like the coronavirus pandemic with sufficient fiscal injection capability. Japan’s fiscal deficit, which had been in “crisis territory” even prior to the outbreak of COVID-19, has snowballed further due to the pandemic.

In January this year, the Cabinet Office released an alarming long-term projection about the ratio of the Japanese public sector’s outstanding debt as a percentage of the country’s gross domestic product. Even in a baseline scenario, assuming that the Japanese economy will keep growing at a modest growth rate, the debt-to-GDP ratio is projected to increase to the world’s worst level of 208% in 2030. This is a major risk for the Japanese economy.

Needless to say, fiscal expenditures alone cannot help the Japanese economy maintain sustainable growth. It may be surprising to know that in 2000, or just after the “Lost Decade” for Japan following the bursting of its asset bubble, Japan ranked second only to Luxembourg in terms of GDP per capita, a measure to compare the economic power of countries. In 2019, or just prior to the outbreak of the coronavirus pandemic, Japan fell to 25th place in the same global ranking.

We Japanese have continued to boast of the nation’s economic power for many years. But we must face the stern reality that Japan’s international status has declined steeply.

The employment adjustment subsidy scheme going back to the mid-1970s and the paid leave support plan introduced only in 2020 were only temporary relief measures for workers. From a medium- and long-term perspective, it is essential for Japanese society to encourage workforce flows to new growth sectors.

Innovation is the utmost key to creating new growth and employment opportunities, helping increase Japan’s GDP per capita. The most important thing to stimulate innovation is to let the public and private sectors work together to that end.

In 2020, the combined number of babies born in Japan and to Japanese nationals abroad fell to an all-time low of 872,600. There are no signs yet that the demographic contraction accelerated by the infectious disease is abating.

The government has been calling on the nation to cooperate in realizing both COVID-19 control and economic recovery. But rhetoric cannot be effective in bringing about a solution to either. Many of those serious issues exacerbated by the coronavirus pandemic, like the hardship the economically vulnerable have been experiencing and the growing downturn in new births, are just what should have been resolved prior to the pandemic, but the government has procrastinated about addressing them. Now is the time for the government to act with specific measures.

Hiroshi Yoshikawa

Yoshikawa is the president of Rissho University, a post he assumed in April 2019 after being a professor at the university for three years. Prior to that, he was a professor at the Graduate School of Economics of the University of Tokyo. He also serves as the chair of the Cabinet Office’s study panel on diffusion indexes for business conditions. Previously, he chaired the National Council for Social Security and the Fiscal System Council and served as a member of the Council on Economic and Fiscal Policy.