Two policy proposals for Japanese economy

Comments on Peter Drysdale “Can Japan deal with shrinking?” 15/08/2010, http://www.eastasiaforum.org/2010/08/15/can-japan-deal-with-shrinking/comment-page-1/#comment-144942
Clearly Japan needs to make significant and effective changes to get out of its economic difficulties.

Government policy makers and advisors must be creative in thinking and policy development.

Two additional measures might be able to help its causes:

1. Given its fiscal situation and the ineffectiveness of monetary policy at present conditions, why don't the government use revenue neutral measures to stimulate domestic demand and the economy? Revenue neutral measures, for example, could be done by increasing income taxes, but those taxes are refundable once consumption expenditure meets certain criteria. So it is a pure price mechanism to encourage consumption and demand.

2. To deal with population aging, Japan could set a policy of moderate immigration programs specifically linked to population aging for specified period. At the same time, the government should encourage higher birth rate by young people. This measure may change the public's psychology and fear of population aging and implications for future hardship.

Both policies can be designed in such a way to achieve agreed objectives.

Of course, the government needs to foster consensus on those policies and their objectives among the public.