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Growth Strategies in the Global Green Age

Takafumi Ikuta
Research Fellow, Economic Research Center

March 18, 2010 (Thursday)

The Japanese government announced the “New Growth Strategy (Basic Policies) for a Shining Japan” on December 30, 2009. Environment and energy headed the list of six strategic areas emphasized in this policy. The stated goal is to leverage Japan’s strength in these areas and create a 50 trillion yen new market and 1.4 million new jobs by 2020.

The demands of environmental measures continue to increase. Submission of the “Basic Law for Prevention of Global Warming” is expected in the current ordinary Diet session. This law will likely specify a 25% CO2 emission reduction target by 2020 as well as introduction of a domestic cap and trade scheme. Demands for new efforts regarding ecological conservation will likely be raised at the 10th Conference of the Parties to the Convention on Biological Diversity (COP 10) to be held in Nagoya in October.

Put differently, this means that there are significant business needs for solving environmental problems. These needs will endure given future environmental destruction and resource constraints. Expecting a growth area, investors poured about US$6 billion into environmental technology venture markets despite the global recession.

Environmental policy is increasingly being placed at the core of growth strategies globally. Various countries are introducing “Green New Deal” policies that promote economic growth and job creation through aggressive investment in the environmental industry as a prescription to the economic ills since autumn 2008. Expectations are high for business growth in fields such as energy-saving in buildings, renewable energies, and next-generation cars and transportation systems.

According to a September 2009 UN report, over 15% of the emergency economic stimulus packages planned around the world targets environmental fields. Japan’s stimulus package had the highest per capita expenditure of 13 major countries, but its ratio of investment into environmental fields ranked second to last at only 6%. In contrast, in August 2009 South Korea announced its “Green Growth” strategy that includes a five-year plan. Though per capita expenditure of South Korea’s stimulus package is only a third of Japan’s, 80% of it is concentrated in environmental investment.

The basic structure of Japan’s “New Growth Strategy” is just starting to take shape. Japan could lose its “edge” if it is slow to flesh out and implement specific measures for strengthening the environmental industry. It is important to specify growth strategies, build consensus regarding introduction of an environmental tax primarily as an environmental measure, and secure financial resources.

International competition will continue to intensify as countries strive to achieve both economic growth and environmental conservation. Corporate management must “sort” between business risks and opportunities from an “environmental perspective,” and nurture the buds of growth in the global green age.