Bridges Weekly Trade News Digest • Volume 13 • Number 7 • 25th February 2009
WTO Urges Japan to Bolster Productivity
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Japan, having faced a 3.3 percent decline in its gross domestic product in the last quarter of 2008, may confront an unparalleled recession over the next year, a WTO review of the country’s trade policies concluded last week.
While the report praised Japan for further liberalising its trade regime over the past two years, it recommended that Tokyo continue to promote structural reforms to reduce domestic business costs and incentivise inward foreign direct investment. Increased reforms should aim to increase competition and stimulate productivity, which has fallen behind that of other major industrialised nations, the report said.
“Improving productivity is particularly important due to the downside risks from Japan’s rapidly aging population and the associated decline in the labour force,” the WTO said.
The WTO Trade Policy Review Body, which met 18 and 20 February to discuss the report, noted that Japan’s recovery from the current downturn will largely hinge on the rate of growth in the global economy and the prices of energy and raw materials. The report also predicted that the adverse effects of the global slowdown are likely to be exacerbated by the recent appreciation of the Japanese yen.
The Japanese agriculture sector remains protected from foreign competition, a fact that is affecting the country’s growth potential, the WTO concluded. However, Tokyo has begun to shift from propping up prices to providing income support for farmers, a policy that is considered less trade distorting.
The WTO praised Tokyo for keeping its markets open amidst the ongoing economic turmoil. The report noted that Japan has not introduced any new trade measures to protect its market since the onset of the financial crisis in September. Moreover, Tokyo has recently made several high-level commitments to resist protectionism, the report said.
The WTO examines each of its Member’s trade policies at regular intervals; Japan’s last review was in 2007.
ICTSD reporting; “Japan continues trade liberalisation in financial crisis,” People’s Daily Online, 20 February 2009; “WTO urges Japan to continue structural reform,” Alibaba, 18 February 2009
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