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2006 OECD Economic Surveys: Japan 2006

image of OECD Economic Surveys: Japan 2006

This 2006 edition of OECD's periodic survey of Japan's economy opens with an assessment of recent economic performance and the economic outlook. It then moves on to analyse key challenges faced by Japan including ending deflation an sustaining soundness in the banking sector, fiscal consolidation, income inquality and social spending, upgrading the innovation system, and improving the environment for inflow of direct investment and workers.

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Strengthening the Integration of Japan in the World Economy to Benefit

Globalisation through international trade, foreign direct investment (FDI) and international movements of labour is a key force driving economic growth. However, Japan is an outlier among OECD countries, with the lowest levels of import penetration, stock of inward FDI relative to GDP and foreign workers as a share of employment, reflecting the legacy of past policies during its post-war development. Policy reforms would help Japan make greater use of goods, services, capital, technology and human resources from abroad. Given the close links among trade, investment and labour flows, it is important to pursue a comprehensive approach, including; i) reducing barriers to FDI and imports, particularly in agriculture, through multilateral trade negotiations and regional trade agreements; ii) relaxing product market regulations, notably in the service sector; iii) fully opening the M&A market to foreign firms; and iv) easing controls on the inflow of foreign workers, including those in non-technical occupations.

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