Trade is liberal politics of credibility.

A new McKinsey Global Institute report, The future of Japan: Reigniting productivity and growth, highlights potential avenues for growth and renewal, emphasizing areas where Japan will have to rely on,the main catalyst for economic momentum. As the negotiation of the Trans-Pacific Partnership trade agreement has gained momentum, the United States and Japan have an opportunity to tap into their already robust bilateral dialogue. Japan, Asia´s oldest democracy is one of America’s strongest and most important allies.

Japan and the United States also share so many values. First Lady´s visit to Japan, for instance, underscore this sense of growing U.S.-Japan relations. Upon arriving in Tokyo, the First Lady Mrs Michelle Obama and Mrs. Akie Abe, the wife of Japan’s Prime Minister, announced a new partnership between Japan and the United States that will help girls around the world go to school. A new girls’ education initiative run by the Peace Corps to understand the barriers girls face in getting an education — and how they can help address those barriers.

But while the focus of Let Girls Learn is international, this effort is also very much about inspiring young people in Japan and In the region. The TPP agenda between U.S. and Japan, and U.S. engagement with the region, one that captures the deep and multi-dimensional ties in U.S.-Asia relations, opens a new chapter in U.S.-Japan relations—not only because of the unprecedented ambition in the economic sphere, but also because the outcome of the TPP talks has emerged as a focal point in solving other important topics that both countries face.

The United States is an indispensable nation to the peace and stability of Asia-Pacific region. The TPP, therefore, guarantees that the American rebalance will not be perceived as a narrowly defined shift in military strategy. The deregulation and competitiveness measures that Japan’s economy sorely needs, it helps realize the single most important component of Prime Minister Abe’s economic strategy: structural reform. Economic development, however, is not enough to bring about complete equality. Policy action is still necesary to achieve equality. Such policy action would be unambiguously justified if empowerment of women also stimulates further development, starting a virtuous cycle.

A World Bank study found that every year of secondary school education is correlated with an 18 percent increase in a girl’s future earning power. When a girl receives a quality education, she is more likely to earn a decent living, raise a healthy, educated family, and improve the quality of life for herself, her family, and her community. In addition, girls’ attendance in secondary school is correlated with later marriage, later childbearing, lower maternal and infant mortality rates, lower birth rates, and lower rates of HIV/AIDS.

But with a falling birth rate, one of the world’s longest life expectancies, and close to zero net immigration, the country is headed for not only a uniquely high ratio of seniors but also a sharp downturn in its total population. All that will put increasing strains on Japan’s ability to manage its rising debt and social-security obligations and will create growing shortages of skills. It’s not surprising that America and Japan are coming together on this issue of Culture Exchange that put economic benefits..

A major private-sector initiative to transform Japan’s productivity performance can launch a “fourth arrow” of economic reform, complementing measures to boost growth through monetary policy, fiscal stimulus, and structural reforms. The new McKinsey Global Institute report, The future of Japan: Reigniting productivity and growth, highlights potential avenues for growth and renewal, emphasizing areas where the private sector can take the lead. With its working-age population shrinking, Japan will have to rely on productivity as the main catalyst for economic momentum.

Many of the barriers and bottlenecks that have constrained growth stem from traditional ways of doing business. Japan can reach some 50 to 70 percent of its productivity goal simply by adopting practices that are already in use around the world. Much of the remaining improvement can be captured by deploying new technologies and business models. Japan will also need to ensure that the enablers of growth are in place, including education and the development of skills, labor-market frameworks, innovation, and entrepreneurship. One crucial element will be increasing labor-force participation by engaging millions of women in the workforce. Changes in policy, business practices, and cultural attitudes will be needed to launch a new wave of female leaders into the ranks of Japan’s corporations and government institutions.

Finding ways to match the two could help growth and address the demographic challenges Japan faces. These considerations also reflect that Trade is liberal politics of credibility: commitments to boost countries attractiveness for foreign direct investors. And Abe´s success depends, first and foremost, on his ability to revitalize the economy. In 2011 the Japanese economy lost its No. 2 status to China. Meanwhile, Japan´s population is both aging and shrinking. Without an economic resurgence, Abe of Japan will have a hard time achieving his greater goal for Japan.


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