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Messages from Keidanren Executives March, 2017 Meeting Basic Needs Makes for Fine Manners

Masakazu TOKURA Vice Chair, Keidanren
President, Sumitomo Chemical Co., Ltd.

When I get together with other members of my generation, the talk invariably turns to the topics of grandchildren and illnesses. Regrettably, instead of writing about my grandchildren, here I would like to turn to a different topic.

Still, in a sense, the topics of grandchildren and illnesses can serve as metaphors for Japan's future (its children) and its present (the elderly).

First, if we look to the present, is Japan's social welfare system truly sustainable? Since Japan has already become a super-aging society, its spending on social security and healthcare continues to increase, but the sustainability of this system—including the source of funds for this spending—is extremely precarious.

In addition, if we look to the future, Japan faces a declining population, and there are questions about whether it can maintain its current level of affluence in the future. The increase in irregular employment among younger workers saps their motivation and is holding down Japan's labor productivity. In an environment in which the potential economic growth rate is now below 1%, even cries for economic growth ring hollow.

Nevertheless, we cannot afford to simply despair. In his new book, Population and Japan's Economy, published last year, Professor Hiroshi Yoshikawa strongly admonishes that Japan's "pessimism about a declining population has gone too far." While a declining population is a big problem, he argues that what is more important for economic growth is innovation. Businesspeople like us need to forge ahead to create product innovations that will generate new sources of demand.

Still, it is an illusion to think that innovation will resolve all of the issues we face. Events that shocked the world last year, such as the Brexit (Britain votes to leave the EU) and the election of Donald Trump, in my view stemmed from social unrest caused by the problems of rising inequality and poverty.

There is an expression in Japanese, which comes from a Chinese saying, that loosely translates into English as "Meeting basic needs makes for fine manners." In other words, it is only once people's basic needs are satisfied in their daily lives that they can begin to make rational decisions. Likewise, Japan must not take the position that these global trends are simply somebody else's problem. We must squarely face the issues of rising inequality and poverty and, to minimize social unrest, work hard on reforming the taxation system to promote a redistribution of income and a sustainable social welfare system.