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This note is taken from Chapter 3 of Economic Policy Reforms: Going for Growth 2010.
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Reforms in nine key areas - a strategy for domestic demand-led growth, the labour market, environment and climate change, education, taxes, health and long-term care, pension reform, regional policy and decentralization and public governance, could bring about a lasting improvement in Japan’s economic prospects, according to OECD analysis.
Japan, a relatively energy-efficient country, has been active in combating climate change. Under the Kyoto Protocol, Japan is committed to reducing greenhouse gas emissions by 6% relative to 1990 over the period 2008-12.
Japan’s health-care system has provided universal access to care and contributed to the outstanding health status of the Japanese. Public spending has been kept below the OECD average through high co-payment rates and reductions in medical fees.
Japanese banks largely avoided the direct impact from the global financial crisis thanks to their limited exposure to foreign toxic assets, the regulatory framework in Japan and the small role of securitisation.
Economic forecasts for GDP, unemployment, inflation and fiscal balance.
Japan is one of the countries hardest-hit by the crisis. We now see signs of a recovery in Japan, thanks to large-scale fiscal stimulus and accommodative measures by the Bank of Japan. But the great challenge today is to move from a policy-based recovery to self-sustained growth.
To achieve its targets to reduce greenhouse gas emissions in a cost-effective manner, Japan should create a mandatory and comprehensive emission trading system, supplemented if necessary, by carbon taxes.
Japan needs a credible fiscal consolidation plan, including spending cuts and tax increases, to maintain confidence in its fiscal sustainability as gross public debt nears 200% of GDP in 2010.