During his speech to the City of London on May 5 Japanese Prime Minister Fumio Kishida introduced an economic policy called “new form of capitalism”.
According to his presentation, it is high time to upgrade the current form of capitalism as the current version fails to cope with two crucial present-day challenges: economic externalities and authoritarian regimes. The first issue covers widening inequality, climate change, and issues deriving from urbanization, which global capitalism could improve on. The second concern is about authoritarian states ignoring or even violating the rules of a liberal economy, which is the core of their rapid economic growth.
The idea of the “new form of capitalism” is synergy between market and state, public and private. Unlike the preceding forms of capitalism, the new one is supposed to make the public and private sectors work together, not decide between them.
“The public sector will act more than ever to draw out the power of the private sector as much as possible, while the private sector will make greater use of its capabilities to solve social problems that have until now been considered the domain of the public sector.”
The Prime Minister sees social challenges as engines of growth under this new form of capitalism. He believes that attracting investments in challenging areas will address social problems while at the same time driving robust growth.
Under his new capitalism agenda, Mr. Kishida presented the program for Japan, which includes the following steps:
- eliminate distribution blockages
- overcome underinvestment in new value-added sectors
- boost labour mobility to new sectors, such as digital transformation and decarbonization
- promote diversity
- nurture a “healthy economic metabolism”
The Prime Minister acknowledged that such a shift will require large investments and might face labour challenges, but reassured investors that they can back the “powerhouse” with confidence. The very fact that Japan is ready for the transformation points to the leading position of the country. “Japan is a buy,” Mr. Kishida said.