The broad outline of the Takaichi Administration’s economic stimulus measures has been solidified.
The Japanese government held the first meeting of the Japan Growth Strategy Council on November 10th. At this meeting, the government compiled a list of key policy measures for the growth strategy. Let’s take a look at some key points.
The Significance of Shipbuilding’s Inclusion in the Growth Sector
Nikkei reported on the Takaichi Administration’s economic policy on November 8th, and that same day, Reuters quoted it and shared it globally. The 17 “strategic sectors” outlined at the Japan Growth Strategy Council on November 10th are almost identical to these earlier reports.
Specifically, 17 strategic sectors have been identified, and investments will be prioritized in these sectors. These 17 sectors include so-called deep tech, such as quantum computing and nuclear fusion.
Another area of note is shipbuilding. Compared to other sectors, shipbuilding, frankly, seems outdated. However, it is precisely in shipbuilding that we can see Prime Minister Sanae Takaichi’s political methods, and commitment to linking economic policy with diplomacy.
First, let’s look at her political ideology and methods. Takaichi sees herself as the successor to Shinzo Abe, who passed away in 2022. The second Abe administration, launched in 2012, rejected the “From Concrete to People” concept promoted by the Democratic Party of Japan, which seized power from them, and instead promoted infrastructure investment under the slogans “Concrete and People” and “Strengthening the Nation’s Resilience.” The concrete in this context refers to infrastructure such as public facilities, levees, and seawalls.
The Abe administration combined infrastructure investment, which also served as an economic stimulus, with crisis management. The Takaichi administration, which sees itself as her successor, appears poised to follow that approach.
This is because shipbuilding has been positioned as a strategic area due to its connection to national security, which I believe is consistent with Abe’s approach.
Currently, the shipbuilding industry, like many other industries, is being pushed out by Chinese companies, and Japanese and Korean companies in the Asian region are facing difficult times. In addition, the United States, which lags far behind other countries in shipbuilding, signed an executive order in April to improve the military’s shipbuilding and maritime capabilities.
Ships are “dual-use” products, capable of both military and civilian use. For example, the military has historically requisitioned civilian ships in times of war.
The inclusion of shipbuilding as a strategic sector is an economic policy that also takes national security into consideration.
Meanwhile, in October, the Japanese and U.S. governments agreed to begin discussions on expanding shipbuilding and repair capabilities. It’s conceivable that South Korea and other allies in the Asia-Pacific region could join this framework in the future.
Against this backdrop, Takaichi and the Japanese government have once again sent a message to Trump through their economic policy that they are strengthening their own defense capabilities through shipbuilding.
How will Takaichi’s “responsible active fiscal policy” progress?
Takaichi believes that an active fiscal policy will stimulate the economy. However, she has repeatedly used the phrase “responsible active fiscal policy” since taking office as prime minister. This sends the message that she is not aiming for a lax fiscal policy, and it also hints at her intention to ensure that her comments and policies do not affect government bond prices.
The “Proposal for Key Measures to be Included in Comprehensive Economic Packages,” a handout distributed at the first meeting of the Japan Growth Strategy Council on November 10, clearly states that one aspect related to active fiscal policy is the creation of a tax system to encourage bold capital investment by companies.
Nikkei commented on this point the same day, saying, “Takaichi is likely considering measures such as a tax credit that would deduct a certain percentage of domestic capital investment from corporate tax payments, and immediate depreciation, which would record the entire cost of capital investment as depreciation in the first fiscal year.”
However, this is merely one part of the economic policies Takaichi wants to implement, and I believe she will not only introduce policies aimed at businesses, but also policies that are popular with the public. Almost all political parties in Japan, from the ruling and opposition parties, right to left, are already proposing tax cuts and economic stimulus measures. In fact, the government itself appears to be considering distributing premium gift certificates as a way to stimulate the economy.
