The Japanese economy is putting deflation behind it, but many challenges still remain before we can be sure that the economy is back on track for growth and that we have restored Japanese competitiveness. In the short-term, the clear issues are ensuring an inexpensive and reliable energy supply, and carrying out the regulatory reforms necessary to create new businesses. In the medium- to long-term, Japan must also look long and hard at how to deal with its dwindling population.

The figures tell the story. The Ministry of Health, Labor and Welfare's Population Survey Report recorded 1,031,000 births in 2013, the lowest level ever. The population has now declined through natural attrition for seven consecutive years, and last year's decline was the largest ever, at 244,000. Even though the total fertility rate ticked up to 1.26 in 2005, we have seen no change in the trend to the aging of society and population shrinkage. This has weakened the labor force and caused the market as a whole to shrink. These can be no doubt that these are factors that inhibit growth, and when considering issues from a medium- to long-term perspective, dealing with the population problem stands out as an unavoidable challenge.

Prior to that, we must overcome the current labor shortage, which requires us to make the widest use of available human resources. If we are to achieve that, we must also develop more flexible approaches to work. Furthermore, we must understand that bringing people with different experience and values into our organizations—women and the elderly and talented foreign nationals—will require us to devise initiatives for transforming diversity into innovation.

We must overcome the shrinking market by increasing the creation of added value and leading the domestic market toward growth. Doing that will require market reforms that make Japan the easiest country in the world for corporations to operate in, and the country where it is easiest to carry out research and development to create new value. In securing this transformation, we will need to stimulate investment activity from Japanese corporations, and to promote direct investment from overseas corporations.

Of course, in order to quickly put a halt to the declining population, efforts are needed to increase the birth rate in Japan. We need to look at the examples offered by France and other countries that have restored their birth rates. We have to come up with measures to improve childcare facilities, and incentives such as tax breaks and to do that we must prioritize social security and make it more efficient, and also restore the health of our public finances.

As we face this crisis of population decline, what is required now is the creation of an environment that allows companies to maximize their capabilities to the full and that allows individuals to give full play to their skills and abilities. By doing so, we will ensure that Japan achieves sustainable growth in the future.