Japan should never lose sight of an exit from its protracted deflation, which has become visible at last, and putting this country on a sure path to revival. Indeed, this year will be a crucial juncture for the nation.
The administration of Prime Minister Shinzo Abe, which gained an overwhelming public mandate in the House of Representatives election last month, should take advantage of its ever more solidified political foundation to speedily tackle policy challenges. While economic resuscitation is inevitably its top priority, Japan has a myriad of issues to address in social security, diplomacy and national security.
This year will mark the 70th anniversary of the end of World War II. The baby boomer generation, who were born in the postwar reconstruction era in 1947-49, are now aged 65 or older. Although the number of the elderly is increasing, the population itself is declining after peaking in 2008.
Japan could face a gloomy future unless it curbs this decline - which is coupled with a graying society and falling birthrate - and prevent itself from losing its vigour.
A quarter century after the end of the Cold War, the international order is being jolted by new crises brought about by sagging US influence, a rising China, rampant international terrorist activities and a wobbling global economy. Japan, for its part, has been hit by one event after another that could threaten its national security.
It is imperative, therefore, for our nation to make 2015 a critical juncture to carve out a bright future so the people can maintain peaceful and stable lives at a time when not only our nation but the world as a whole stands at a crucial point of time.
Voters gave a stamp of approval to the stances of the ruling parties in the lower house election, which hinged on whether or not the nation should continue to implement the Abenomics economic policy package.
Nonetheless, Abenomics faces many challenges. For example, its benefits are being felt neither by communities outside major urban centers, nor by small and midsize companies.
The Abe administration must produce fruits from a stable economic recovery, while making sweeping changes to compensate for Abenomics' shortcomings. In particular, it must urgently bolster its growth strategy.
Abenomics emphasizes dispelling the long-standing "deflation mind-set," or contraction inclination, on the part of Japanese people and prompting people to possess strong motivations to initiate positive moves.
The first of Abenomics' three arrows is monetary easing policy to encourage commodity prices to rise, while the second is aimed at creating momentum for the economy to turn upward through government spending. Then, the third arrow comes into play: Growth strategy to support corporations and individuals who want to use their ingenuity to launch new ventures.
If the third arrow misses its target, the first and second arrows could be wasted.
The prime minister has pledged to break entrenched "bedrock" regulations. Making regulation reform designed to promote industrial rejuvenation a pillar of growth strategy is proper, but the problem lies with lackluster measures.
Unless the administration presents bolder reform measures in concrete terms in such areas as agriculture, medical service and nursing care, a spirit of taking on challenges will not percolate in the people's minds.
Lowering energy costs by steadily restarting idled nuclear power plants after their safety has been confirmed and hurrying the conclusion of Trans-Pacific Partnership negotiations are both essential factors for corporations to project business environments in the years ahead.
Corporate leaders may be advised to switch to aggressive strategies after years of prudence.
For the business year ending in March, listed companies are expected to report more profits for the third consecutive year. Their profits may even reach one of the highest levels ever.
These companies should use increased profits to start new businesses and invest in human resources. The government must support such moves by, for example, lightening tax burdens on companies that opt to raise wages.
A bolstered growth strategy also is pivotal for dealing with the declining population.
Improve employment opportunities
Against the backdrop of the slumping Japanese economy since the bubble economy's collapse are shifts in the nation's demography. People of productive ages - older than 15 but younger than 65 - started declining in number after peaking in the 1990s, before the nation's total population decreased.
If the number of people in the prime working age bracket drops, the nation's production and purchasing powers will decline, scuttling its economic growth. The Japanese economy's potential growth rate, which was above 3 per cent in the early 1990s, has dropped to around 0.5 per cent.
If Japan wants to maintain economic growth when its population is decreasing, it must secure a sufficient number of workers and, for this purpose, it should create an environment to make it easier for women and elderly people to work.
Another essential task is to improve the working conditions of nonpermanent employees, many of whom are young people and women. Creating more jobs and improving the levels of wages and other payments given to workers in a manner commensurate with their labours will do much to vitalize society.
This nation's population decrease started in provincial districts before affecting urban areas, and the progress in the decline is faster in provincial regions. To cope with the problem, it is important, first and foremost, to invigorate various kinds of industries in such areas, including small and midsize corporations and agriculture - a task necessary for securing job openings for local young people.
There also is a pressing need to reform the social security systems with the aim of sustaining our nation as a society in which people can live in safety. It is necessary to improve the quality of programs aimed at addressing the problems arising from the low birthrate, including a measure to help people with child-rearing. This is essential for raising the fertility rate and halting the population decline.
Our nation's spending for the various needs of children and family members stands at the 1 per cent level vis-a-vis its gross domestic product. This poorly compares with the 3 per cent level in Sweden and France, both of which are making a good measure of progress in addressing the problems tied to their low fertility rates. Our country's figure in this respect contrasts starkly with its higher degree of spending for policies and projects aimed at serving elderly persons.
Given this, it is necessary to allocate a greater portion of our nation's limited financial resources to government measures designed to deal with its low birthrate. Expenditures in this respect can be regarded as a form of investment in our country's future. With this in mind, steps should be taken to improve the efficiency of government spending in the fields of medical and nursing-care services.
Measures include an improvement in the number and quality of doctors who will serve as regular physicians for people living in their neighborhood. Progress in this respect can reduce the number and frequency of elderly people receiving treatment at large hospitals as an outpatient or inpatient. An increase in the use of low-price generic medicine is also necessary.
All this constitutes a required effort to exert wisdom and ingenuity in curtailing medical bills while also maintaining the levels of medical services given to the public. A successful attempt to do so will make it possible to use saved money to finance necessary policies and programs.
Our national debt exceeds ¥1 quadrillion (S$1.1 trillion). If the country's fiscal crisis is left to take its own course, it is bound to undermine the international confidence in the Japanese economy, forcing our future generations to shoulder the burden of paying off the national debt.
In announcing his decision to put off increasing the consumption tax rate to 10 per cent, the prime minister publicly said he would adhere to the goal of achieving primary balance by the end of fiscal 2020. Abe also said his government would put together an action plan by the end of this summer. His pledge must be fulfilled without fail, as it would be an initial step toward successfully restoring fiscal health.
The post-World War II international order - the symbol of which exists in the form of current national borders - is being greatly shaken. This is evident in such recent incidents as Russia's coercive action taken to annex the Crimean Peninsula and the expansion of influence exerted by the Islamic State extremist group.
The end of the Cold War between the Western and Communist blocs raised hopes of seeing the establishment of a stable world order, with the United States playing a central role in this respect on the strength of its status as the standard-bearer of free and democratic values.
However, the fact remains that the international community is experiencing growing turmoil nowadays, due largely to a relative decline in the power of the United States.
China's conduct still worrisome
A collapse of the world order would greatly harm Japan's national security. It is essential to keep a close eye on China's conduct in particular. During recent years, that country has been seeking to greatly expand its maritime scope by taking advantage of its outstanding military and economic strength in this part of the world.
In November, Abe and Chinese President Xi Jinping held talks, the first summit meeting between their nations in about three years. This can be regarded as one step toward an improvement in the bilateral relationship. However, China remains unchanged in its efforts to change the status quo by force.
China must be urged to restrain itself from provocative behaviour in waters around the Senkaku Islands in Okinawa Prefecture. At the same time, it is necessary to continue efforts to build confidence between the two nations, including the creation and improvement of a maritime liaison mechanism between the Self-Defence Forces and the Chinese Army.
The Chinese economy is entering a period of transition from rapid growth, chiefly led by manufacturing businesses and real estate investment, to stable growth mainly encouraged by service-sector operations and consumption.
China should learn from the experiences the Japanese public and private sectors gained in achieving economic growth, complemented by efforts to facilitate bilateral cooperative ties in a manner beneficial to both nations. A successful attempt to do so will do much to build what is called strategically reciprocal relations between Japan and China.
The opposite would result if China toughened its hard-line stance against other nations, in the hope of averting the discontent of its people about the implications of a shift in its industrial structure. That would only increase the possibility of putting the two nations at risk.
Japan needs to be better prepared for any Chinese behaviour through its alliance with the United States and increased cooperation with Australia and other neighbouring nations that share our values. It is also deeply disconcerting to note that North Korea is striving to increase the power of its nuclear weapons and ballistic missiles.
At a Cabinet meeting last year, the Abe administration finalized a decision to reinterpret the Constitution in relation to our country's right of collective self-defence, a move aimed at enabling this nation to exercise the right in limited situations. Steady progress must be made in creating and revising laws related to the nation's security framework, with a view to complementing the Cabinet's decision. It is indispensable to make sure our nation can seamlessly respond to any circumstances - not only peacetime situations but armed emergencies. This endeavour is essential for the preservation of our national security.
Stronger Japan-US alliance needed
Another important task is to carry out a project to transfer functions at the US Marine Corps' Futenma Air Station in Ginowan, Okinawa Prefecture, to the Henoko area in the prefecture. Doing so is part of an effort to maintain the deterrent potential of the Japan-US alliance on one hand and reduce the burden shouldered by local residents in hosting US military bases in the prefecture on the other.
Admittedly, some opposition parties persist in opposing the idea of exercising the collective self-defence right and relocating the Futenma facility to Henoko. Nevertheless, steady headway must be made in accomplishing these two security-related goals.
The prime minister should be ever more considerate and careful in convincing opposition parties to support his government's policies and explaining them to the public. He should know better than to feel complacent about the current political landscape, with the Liberal Democratic Party as a predominant presence confronted by many weak opposition parties.
This year marks the 70th anniversary of the war's end. Japan may face a situation in which renewed questions are raised about its perception of history-related issues.
Efforts should be continued to dispel the groundless and misguided accusations that women were forcibly taken away to work as so-called comfort women for Japanese soldiers during the war. At the same time, however, restraint should be exercised in the conduct of relations with China and South Korea, so these nations will not be given a pretext to criticise our nation in this respect. A row arising from the prime minister's visit to Yasukuni Shrine in December 2013 illustrates this point.
Enhancing Japan's international reputation requires contributing our efforts to the fight against the host of problems not only in the Asia-Pacific region but in the rest of the world.
The Islamic State - a militant group using the Internet to recruit young people from around the world and seeking to widen its sphere of its influence in disregard of national borders - presents an entirely new threat to the international order. Its threat is beginning to reach the United States, European and Asian nations.
Japan should do its utmost to help promote international cooperation in taking specific measures to shut off the flow of money and people to the group, thereby stripping it of resources needed to support its activities.