Remarks by Angel Gurría, OECD Secretary-General
Tokyo, Japan, 23rd April 2013
(As prepared for delivery)
It is a great pleasure to meet you all.
As you know, our Organisation is working to help governments design, promote and implement better policies for better lives. To do this in the most effective manner, we work very closely with the executives of our member and partner countries, but also increasingly with the legislative powers. The relationship with Parliamentarians is more and more important for the OECD.
We see this as a win-win situation. On the one hand, the OECD greatly benefits from the legislators’ experience and know how in the art of policy-making and in the political economy of reforms. Our analysis benefits from your close contact with the daily problems of the people you represent. On the other hand, our work aims to enrich the parliamentary debate, providing the necessary technical data and analysis to design innovative policies, improve regulatory frameworks and promote reforms, as well as to build the necessary consensus around them. It brings the perspective of best practices in other member countries that may inspire policy action among peers.
As our countries struggle to leave the crisis behind, they face a great opportunity to improve their policies, their institutions and their frameworks to promote a stronger, cleaner and fairer growth through inclusive and effective structural reforms. Achieving this goal greatly depends on the skills and vision of our parliamentarians, on you! This is why our relationship is so important. This is why we are here today.
To promote this relationship, in 2011 we created the OECD Parliamentary Network. The aim of this Network is to create more opportunities for exchange between parliamentarians and OECD experts in a systematic manner. The Parliamentary Network convenes two high-level Parliamentary Seminars each year, one of them held in one of our member countries, where we can discuss the most pressing policy issues.
I would like to take this opportunity to invite you to this year’s Parliamentary Seminar, which will take place on 17-18 June in Stockholm, hosted by the Swedish Parliament. We will focus on inclusive growth and how parliaments can take full advantage of with OECD work.
I would also like to encourage you to visit us at the OECD. This invitation is open to all parliamentarians and staffers, in addition to your officially-nominated focal point, Mr. Takuji Hanatani, Director General, International Affairs Department, House of Councillors. We can make this visit a fruitful one by putting you in touch with our experts and analysts, and by sharing our thoughts and expertise with you.
The OECD’s relationship with Japan is very strong.
Japan is one of our most active members. It has made remarkable contributions to the work of our Organisation and is playing a central role in key policy areas like science and technology, education, environment and investment.
Our collaboration with Japan has intensified in recent years, under the leadership of Ambassador Yoshikawa. We have been dealing with the Great East Japan Earthquake, through the Nuclear Energy Agency of the OECD. I remember I visited Japan just one month after the tragic events, in April 2011, to offer our support. We delivered in many fronts. For example, one year later, after hard work and close collaboration, the OECD launched a joint education initiative in the Tohoku region.
The initiative has brought together high school students from some of the most devastated prefectures to brainstorm on ways to revitalise Japan. They will present their work in Paris in 2014, which also marks the 50th anniversary of Japan’s accession to the OECD. Our mission with this project was not only to help rebuild Japan, but also to highlight this country’s incredible resilience and recovery capacity.
We’ve also supported the recovery with public policy insights. When I visited Japan last April, I shared a set of policy recommendations with your leaders, included in a brochure entitled “Policies for a Revitalization of Japan”. I’m pleased to see the recovery beginning to take hold, as we reflect in the 2013 Economic Survey of Japan, which I presented yesterday.
Japan’s Economic Survey: encouraging signs & important structural challenges.
Our Survey highlights several positive signs in Japan’s economic outlook. After two rather grim quarters, exports stabilised in late 2012, leading to faster output growth in the first quarter of 2013, driven by a rebound in industrial production. Japan’s output is now projected to grow by around 1.5% in 2013 and 2014. The recovery of exports should be accompanied by a parallel rise of investment by Japan’s cash-rich business sector.
Our upward revision of Japan’s outlook is based on a series of recent positive developments, like the 10.3 trillion yen stimulus package announced by the new government in January 2013; the depreciation of the yen by 15 to 20% against the dollar since mid-November; and the rise of equity prices by about 30% over the same period. These are very welcome changes which will bear important fruit as the measures promoted by “Abenomics” gain traction.
However, there is no room for complacency. Our report also raises the need to address some pressing structural challenges, like stopping and reversing the rise in the debt-to-GDP ratio, which has risen steadily for two decades to over 200% of GDP. Stabilising the public debt ratio by 2020 may require, depending on the evolution of GDP and interest rates, an improvement of the primary fiscal balance from a deficit of 9% of GDP in 2012 to a surplus as high as 4% by 2020. A tall order indeed!
This will require a stronger and protracted fiscal consolidation effort which, in other OECD countries, will slow nominal GDP growth, making fiscal adjustment still more difficult. Hence, exiting deflation and boosting Japan’s growth potential are key to addressing the fiscal predicament. In this light, the new government’s resolve to revitalise the economy through a three-pronged strategy combining bold monetary policy, flexible fiscal policy and a growth strategy, is most encouraging. In this context, the Bank of Japan’s new commitment to a 2% inflation target and “quantitative and qualitative monetary easing”, is welcome.
Our Survey also points to other necessary structural reforms, like the ones required in the agricultural sector (a key sector in the Tohuku region) in which the high level and distortionary nature of agriculture support is imposing heavy burdens on consumers and taxpayers; or in the electricity sector, to reduce the negative impact of integrated, regional monopolies and the lack of an effective price mechanism, and thus help to accelerate the development of renewable energies.
The study makes several recommendations; setting out a detailed fiscal plan, including spending goals by category and a timetable for tax hikes; using the Council on Economic and Fiscal Policy as an expert body to guide and monitor fiscal consolidation; maintaining an expansionary policy stance until inflation has durably reached the 2% target level; shifting from market price supports in agriculture to decoupled payments, while phasing out supply control measures; liberalising border measures on agricultural goods to facilitate Japan’s participation in regional and bilateral trade agreements; and offsetting the planned decline in nuclear power supply by expanding the role of renewable energies through green growth policies, including a strong and consistent price on carbon.
Dear Parliamentarians, Ladies and Gentlemen:
The crisis is giving us a unique opportunity to build a better world, a better global economy. We need to update and improve the rules of the game to turn our economies and our markets into effective tools for broad social progress. The central arena to promote these changes is in our parliaments.
This is why the OECD is making a constant effort to incorporate Parliamentarians like you into the debate as part of our working process. We want to help you improve your interaction with your executives, with your private sectors, with your colleagues from other countries, and ultimately, with your people. You can count on us, on our analysis, our data, our best practices and experts to enhance your capacities and promote the reforms and legislations that will level the playing field, foster more inclusive growth, and bring back enthusiasm among our youth! Thank you!