Transition to a Self-Sufficient Nation

Changes in the International Financial Situation

As is evident from the current international trade situation and the international financial climate influenced by it, international capital movement will likely stagnate for the time being. Furthermore, the U.S. economy, which has been supporting global (wasteful) demand, is expected to enter a period of demand stagnation due to inflation for several years. Additionally, if a Republican administration holds power for multiple terms, it is anticipated that the country will turn inward in economic terms, leading to a 'return to domestic production.' In other words, it is expected to become similar to the U.S. during the New Deal era.

It is well known that the ratio of Japan's external economy to its total economic scale is low. For example, the ratio of exports to GNP is around 10%, and net exports (the actual contribution to national income) are nearly zero, or even trending toward negative.

While it is true that corporate profits have been supported by earnings from export industries, external demand is fundamentally highly volatile and is a demand factor beyond Japan's control. In recent macroeconomics, the development of behavioral economics has made it clear that economic welfare loss is caused by the very existence of economic fluctuations (business cycles). Therefore, reducing the influence of uncontrollable economic fluctuation factors on domestic economic activity is desirable for economic welfare.

Autarky Orientation

Of course, there is no way the Japanese economy can become a self-sufficient autarky, so there is absolutely no need to actively hinder exports or imports. In particular, imports are necessary for energy resources and food, and importing these is not a vice, as seen in the example of the Republic of Venice (which imported 100% of its food but was able to maintain that economic system for nearly 500 years).
In light of the recent 'Reiwa rice shortage,' what is important is to clarify the scope of material metabolism for resources necessary for survival, such as energy and food, and to orient imports and exports within that scope. This means stopping the setting of policy agendas that promote imports, exports, and the introduction of foreign capital (this includes policies that prioritize inbound tourism).

Nothing will improve if we 'escape' to or 'depend' on the profits of a few export industries while turning a blind eye to the reality of those in the domestic economy, local economies, and the lower-to-middle strata of society who are at risk of falling behind. We should focus on 'investment' within rather than outside. In this sense, we should refrain from introducing at the national economic policy level the adaptation strategy of a single company—namely, 'selection and concentration,' or focusing on businesses deemed to have high financial investment value—which has fostered the aforementioned 'escape' and 'dependence.' This would only lead to repeating the failures of 'liquidationism' and 'harsh austerity.'

Self-Sufficiency and Inclusion

First, it is necessary to transform Japan itself into an inclusive society. There is no benefit to society or the nation in leaving behind socially vulnerable people such as the elderly, the NEET population, the employment ice-age generation, and children from impoverished single-parent households. Unless it is a society that embraces and involves them as citizens who share social costs (citoyens, not merely hommes), that society cannot be sustained, and the foundation for the nation's existence in a constitutional sense (avoidance of conflict) and its legitimacy (social contract) cannot be maintained.

In summary, rather than aiming for export-oriented businesses that seemingly earn capital returns 'efficiently,' we should make the securing of imports and exports sufficient to maintain material metabolism our foundation. We should thoroughly invest public resources into life-support services that can transform us into an inclusive society, shift toward policies that allow these services to develop economically, and pour our energy into creating a safety zone where the influence of highly volatile and uncontrollable overseas economies does not affect the economic conditions of the vulnerable in Japan. The economic growth orientation that forces an 'infinite marathon' on all citizens is a product of the modern era, and we should realize that it cannot be sustained for centuries.

As a supplement, the current trend of a weak yen will support this transition to a self-sufficient economy. Because the terms of trade 'deteriorate' rapidly due to the weak yen, the amount of economic output Japan needs to export will increase significantly, while leading to a reduction in the physical volume of imported goods.
The impact on Japan's economic welfare depends on income and substitution effects, and while I believe it is currently contributing in a negative direction, I think we need a little more patience for the return of manufacturing to the country and the reduction of welfare outflows through the import of information and communication equipment and electrical appliances.
However, as a monetary policy measure against domestic inflation, it is necessary to raise interest rates, and a slight shift toward a stronger yen must be tolerated for that purpose, which may be a difficult situation.

By the way, as Krugman says, I would add that it will take several years of a somewhat overshooting weak yen until the hysteresis effect is neutralized.

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With the theme of a self-sufficient economy, I chose Van Gogh's 'The Sower.' I dared to choose Van Gogh instead of Millet.