Reviews, Commentaries, etc. - NOMURA Koji

"Deflation Behind Inflation" (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun)   2022.12

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

Accelerating Justice (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun)   2022.11

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

"Electricity Burden Grows to 6 Trillion JPY in 2022- Need to Curb Costs to Boost Manufacturing" (in Japanese)

Koji Nomura

Energy Policy Report (Energy Forum Inc.)   2022.10

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

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What is the total cost of electricity in Japan today? Distinguishing between the electricity sector as an "industry" and electricity as a "product" has become increasingly difficult due to the diversification of utilities and the expansion of new-entrant suppliers and self-generation, making it harder even for electricity businesses to see clearly the burden being borne by the national economy as a whole. Along the path of long-term energy transition, close attention must be paid to the energy cost burden along that route. If the accelerator is pressed on inefficient decarbonization policy while cost increases remain difficult to see, the high-cost structure that would emerge in a few years' time could become a heavy drag on the Japanese economy. With this problem in mind, the author's research group has been constructing an Energy Cost Monitoring (ECM) framework since April of this year. The latest ECM captures conditions through August of this year. Total electricity consumption in August exceeded the same period of the previous year by 2.2% as recovery from the pandemic continued, but its cost increased by as much as 37%. A simple projection assuming that August price levels persist through December of this year estimates that the total electricity expenditure for calendar year 2022 will be approximately 6 trillion yen higher than the previous year. Total electricity consumption expenditure is expected to reach 24.2 trillion yen, far surpassing the previous peak in the Japanese economy of 19.8 trillion yen recorded in 2014. The pass-through of primary energy price increases caused by the invasion of Ukraine to retail electricity prices has yet to be fully reflected, and the projected year-on-year increase of 6 trillion yen within this year could even be described as a conservative estimate. A similar simple projection suggests that total final energy consumption expenditure for this year is expected to be 13 trillion yen higher than the previous year's figure of 37.4 trillion yen. The enormous surge in cost burden is a global phenomenon, but it also has characteristics specific to Japan. The rise in household consumption prices in the second quarter of 2022 was 6.7% in the United States and 6.6% in Germany, compared to a relatively contained 2.3% in Japan — but this does not signify the success of price-suppressing policies. Over the same period, the GDP deflator showed 7.6% in the United States and 5.9% in Germany, against minus 0.3% in Japan, with deflationary pressure remaining firmly entrenched. Japanese producers are insufficiently passing through cost increases, and even as the world faces the same rise in energy costs, Japan's real burden is becoming proportionally greater. At the same time, Japan's prolonged deflationary trend has enhanced the competitiveness of macro-level production prices. Under the excessively depreciated yen, the Japanese currency is currently undervalued by as much as 35%, bringing price competitiveness to its strongest level in nearly half a century. Exports rose by approximately 20% year-on-year in August, with the pace of recovery exceeding even the experience of the Abenomics recovery period. While the widening trade deficit is primarily attributable to rising fossil fuel costs, international crude oil prices have been declining since June. For domestic manufacturing recovery to be sustained under the favorable conditions provided by a weak yen, containing future electricity costs will be the crucial test.

Seeking a Desirable Carbon Tax (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun)   2022.10

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

"Energy transition and the Challenges for Japan's Economy" (in Japanese)

Koji Nomura

RIETI Highlight (Fall 2022) (RIETI)  92   24 - 27 2022.10

Article, review, commentary, editorial, etc. (bulletin of university, research institution), Single Work

Inside and outside of the issue (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun)   2022.08

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

Production is a Shura (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun)   2022.07

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

Deflationary pressure in the Japanese economy hidden by global inflation: Energy policy for a return to domestic production (in Japanese)

Koji Nomura

Energy Policy Report (Energy Forum Inc.)   2022.07

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

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Prime Minister Kishida emphasized that "while prices in Europe and the United States are rising by 7–8%, Japan is maintaining an increase of around 2%," but looking at only one facet of a situation may prevent one from recognizing the risks it conceals. Just as Professor Leontief once described economic analysis as "like reconstructing the blueprint of a complex engine," without the ability to imagine how a complex engine actually moves, latent risks go unfelt and prescriptions go wrong. As Professor Summers warned last spring of the risk of an inflationary spiral in the U.S. economy, U.S. CPI over the twelve months through May rose 6.0% even excluding food and energy, with inflation above 4% on this measure persisting for twelve consecutive months. In Japan, meanwhile, CPI has continued to rise by 0.3–0.4% month-on-month since the start of this year, and with the added effect of yen depreciation, concern has grown over the decline in real incomes due to rising import prices. Japan's inflation, however, is a cost-driven phenomenon — stemming from energy resources and the weak yen — and the capacity of demand expansion to drive price increases remains fragile. What matters here is the distinction between two gauges: the CPI (consumption prices) and the GDP deflator (production prices). Taking a restaurant as an example, the price paid at the till is the consumption price, while the production price measures the price of the value added truly created by that restaurant alone, after deducting the cost of raw materials, energy, rent, and similar inputs. The two can at times move in opposite directions. Even if menu prices rise, if the prices of energy and ingredients rise by more, production prices may actually fall. In the first quarter of this year, U.S. consumption prices rose 6.2% year-on-year while production prices rose even further at 6.8%. The price increases themselves are undesirable, but behind them lies strong demand pulling prices upward. In Japan, meanwhile, consumption prices rose 0.5%, while production prices fell by 0.8%. Japanese producers find themselves unable to pass on rising energy and import costs and are compelled to adapt by lowering their own production prices. Even as the world faces the same nominal rise in crude oil prices, the real burden falls more severely on Japan. Yen depreciation carries both harm — in the form of rising import prices — and benefit, by creating room for domestic producers competing with imported goods to raise their prices. Since the Plaza Accord, tolerance for excessive yen appreciation has been a source of deflationary pressure, compelling wage suppression at home; a sustained weak yen has the potential to reverse that tendency and create room for nominal wages to rise. The current excessive yen depreciation represents an ideal opportunity to sell overseas assets and repatriate capital domestically, but the structural reason this is not happening is the absence of an environment that makes returning to domestic production attractive. Demands for energy conservation that go on without end and without technological grounding, the expansion of renewables that makes higher electricity prices inevitable, the erosion of trust in stable electricity supply — the government, captive to a reckless rush toward carbon neutrality, has lost sight of the foundations on which the Japanese economy rests and of the true role of energy policy. It is precisely Japan's energy-intensive manufacturing industries that boast internationally high productivity. Policies that see only one facet of reality are deepening structural challenges.

Technology and Wage Differentials (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun)   2022.06

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

「日本経済に望ましい持続的円安」

野村浩二・浜田宏一

『正論』 (産経新聞社)     74 - 87 2022.06

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Joint Work, Lead author, Corresponding author

Monthly RUEC for Japan's Economy (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun)   2022.04

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

The Japanese Economy's Vulnerability to Rising Energy Prices: What Half a Century of U.S.-Japan Comparisons Reveal (in Japanese)

Koji Nomura

Energy Policy Report (Energy Forum Inc.)   2022.03

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work, Lead author, Last author, Corresponding author

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France's economy minister described the surge in crude oil and natural gas prices triggered by Russia's invasion of Ukraine as having an impact comparable to the first oil shock. The erosion of the resilience to oil price surges that had been built up since the oil shocks was already being flagged as a concern more than ten years ago. In 2009, the European Commission sounded the alarm that a sustained rise in "real unit energy costs" (RUEC) had been observed across major economies since the mid-1990s, with the most severe increase found in Japan. Assessing the impact of energy price surges requires evaluating prices inclusive of secondary energy such as electricity, alongside the "real energy price" — the relative price obtained by deflating by the price of domestically produced goods and services. If domestic output is internationally competitive enough to pass higher costs through to production prices, the impact of a nominal energy price increase can be mitigated. Conversely, where energy prices rise due to domestic factors — such as the reckless promotion of renewables regardless of cost — and companies are unable to raise the prices of goods exposed to international competition, the same nominal price increase inflicts far greater damage. In Japan, where deflationary conditions have persisted, the real impact is more severe. A further consideration is energy productivity. In economies where regulations such as the Energy Conservation Act and subsidy programs have driven the adoption of energy-saving equipment beyond what economic rationality would dictate, cheap energy-saving technologies are already saturated, and the scope for adaptive response to price increases is limited. In the United States, by contrast, where energy-saving investment has not been front-loaded, rising prices have rendered previously uneconomical energy-saving technologies viable, helping to cushion the impact. RUEC is an indicator obtained by dividing the real energy price by energy productivity, and as such serves as a composite measure of resilience that captures this information. Throughout the postwar period, Japan has consistently faced energy prices roughly 1.5 to 3 times higher than those in the United States. On the eve of the high-growth era, Japan's total factor productivity was approximately half that of the United States, meaning that similar products had to be priced at roughly half U.S. levels to win demand in the market. What bridged the gap between high input prices and low output prices was cheap labor: at the time, Japan's hourly wages were no more than 20% of U.S. levels. Subsequently, over the half century through 2010, the Japan-U.S. gap in real energy prices narrowed, driven by the convergence of production prices between the two countries during Japan's high-growth years and by corporate efforts to secure stable and affordable energy supply. At the same time, however, this progress dulled awareness of the underlying problem. After the earthquake disaster, electricity prices in Japan rose due to the shutdown of nuclear plants and the promotion of renewables, while the United States benefited from the shale revolution, causing the Japan-U.S. real energy price gap to widen again. As the real price gap expanded, Japan's advantage in energy productivity also narrowed, and the country is now approaching its most vulnerable position in the postwar economy. Promoting energy conservation domestically beyond the bounds of economic rationality will only invite further hollowing-out and economic stagnation. Expanding renewables remains costly relative to providing electricity of equivalent quality. For Japan's energy transition, a narrow transition pathway must be sought — one that raises the overall efficiency of the economy and restrains the widening of the RUEC gap.

Origin of Electricity Demand (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun)   2022.03

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

Prescriptions for the German and Japanese Economies (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun)   2022.01

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

Challenges of the Energy Transition in the Japanese Economy (in Japanese)

Koji Nomura

Nikkan Kogyo Shimbun (Nikkan Kogyo Shimbun, Ltd)   2021.12

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

Will "big government" energy and environmental policies work? (in Japanese)

Koji Nomura

Energy Policy Report (Energy Forum Inc.)   2021.12

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

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Prime Minister Kishida's Council for the Realization of a New Form of Capitalism published an "Emergency Proposal" on November 8th. Its defining feature was its fiscal scale: an economic package of 55.7 trillion yen in fiscal expenditure terms — the largest ever — was approved by the Cabinet, and new government bond issuance for fiscal 2021 is expected to exceed 65 trillion yen. The government has made clear its willingness to accept fiscal deficits. More worthy of attention than the distribution strategy is the shift in the foundations of the growth strategy. In June of this year, the Ministry of Economy, Trade and Industry published its "New Directions in Industrial Policy." The new directions call for a transition away from conventional industrial policy aimed at creating favorable market conditions toward a more powerful industrial policy involving "large-scale, long-term, and planned" fiscal mobilization for "market creation" oriented toward solving medium- and long-term challenges. In energy and environmental policy as well, there are signs of a move toward an even larger role for government than before, with the possibility that levies to promote renewables, costs such as building insulation, and even the increase in energy prices themselves may be offset through subsidies. If direct burdens on consumers and producers are avoided, will the public accept further bond issuance? The case for expansionary fiscal policy as a way out of prolonged economic stagnation has been debated since before the pandemic. MMT advocates sustained fiscal deficits and calls for the permanent deferral of debt, while the New View locates the causes of economic stagnation on the supply side and prescribes investment tax cuts and productivity-enhancing infrastructure investment. What is required of the government is a rigorous examination of the content of expansionary fiscal policy and a readiness to reverse course depending on circumstances. Fiscal policy shifts should not be endorsed without thinking through how funding can be secured when economic conditions change. The pandemic generated broad consensus in favor of accepting fiscal deficits, but its durability is questionable. Professor Summers, a central scholar of the New View, sounded early warnings about the scale of the Biden administration's stimulus package out of concern over inflation, and it can now be said that his argument has been entirely vindicated. There is much noise about the world having shifted to expansionary fiscal policy, but its sustainability remains in doubt. Acceptance of fiscal deficits does not amount to endorsement of a "big government" industrial policy. If the government intervenes to create markets, it risks deepening dependence on public procurement and trapping the private sector in a nest of vested interests. The expansion of subsidy dependence has likely been a major factor in the loss of dynamism among Japanese companies over the past twenty years. Government demand creation may offer companies a temporary respite, but it is fragile and fleeting, and there is no shortage of examples where private enterprises have declined in the wake of the feast. If subsidies are wielded as a magic wand in a "big government" energy and environmental policy, they will rigidify corporate asset structures and business models. Energy transition requires a long time horizon and is subject to enormous uncertainty — both in terms of available technologies and the economic environment. No one today knows what an efficient path to decarbonization looks like for Japan. Even in pursuing expansionary fiscal policy, Japan must not forfeit the flexibility that would allow its economy to adapt to technological and environmental changes along the transition path. Against a scattershot approach to policy, the call for "wise spending" rings hollow.

Psaudo Time Travel (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun)   2021.12

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

Six-Fold Pain of the Japanese Economy (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun)   2021.11

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

Quantity and Quality of Green Jobs - A Weak Foundation for Green Growth Strategies (in Japanese)

Koji Nomura

Energy Policy Report (Energy Forum Inc.)   2021.09

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

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In June of this year, the "Green Growth Strategy Accompanying Carbon Neutrality" was unveiled. Its projected employment creation effect, measured as a net figure, is stated as 8.7 million jobs in 2030 and 18 million jobs in 2050. With total employment in 2050 estimated at around 50 million, this would mean one in three workers engaged in green jobs — an enormous number. In November of last year, the UK government presented a plan to create 250,000 jobs by 2030. An independent Green Jobs Taskforce was established, and its report was published in July of this year. The report finds that not all current green jobs are good jobs, and sets out fifteen recommendations for creating high-quality green employment. It emphasizes that long-term investment in human capital is indispensable for quality employment, and calls on the government to present a concrete roadmap for the energy transition. The employment creation figures put forward by the Japanese government are far too large. When the author inquired with the Ministry of Economy, Trade and Industry about the assumptions and methodology behind them, the response was that there were "no plans to make them public." Japan's 2030 target is 4.4 times larger than the UK's and 2.7 times larger in GDP terms — and the UK figure is gross, meaning the net figure would be considerably smaller still. A net job creation figure of 8.7 million goes beyond mere ambition and gives the impression of distorting the information base on which policy is formulated. What is needed in the energy transition toward decarbonization is not a performance of stacking up employment numbers, but a problem-finding role that surfaces the real challenges along the transition pathway. The logic by which green investment would raise productivity is nowhere to be seen. Green investment requires more capital than conventional approaches to produce the same level of output, and will almost certainly damage total factor productivity. Unless competing nations are similarly compelled to undergo the same transition, the competitiveness of Japanese industry will decline, and the value generated by workers will inevitably fall. Whether high-quality green jobs can actually be created depends on the internationally harmonized internalization of carbon emission costs — and the international coordination required to achieve this, still far from realization, remains the greatest obstacle. What is required of the government is not "resolute implementation," but flexible thinking under differing conditions.

Relics of the Green Sahara (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun)   2021.09

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work