Policy Proposals Economic Policy, Social Security Call for Early Implementation of the "New Growth Strategy" Toward Sustained, Private-Sector-Driven Economic Growth
July 20, 2010
1. Urgent Need to Secure Level Playing Field for Japanese Businesses
Amid ever-intensifying global competition, Japanese companies are engaged in a daily struggle for survival. Meanwhile, countries around the world are accelerating initiatives aimed at revitalizing businesses to promote economic growth and maintain or create jobs. Under these circumstances, Japan must not lag behind other nations in its policy response. Japan must secure level playing field by addressing its high corporate tax burden, lack of labor market mobility, and unreasonable targets for greenhouse gas reduction. If our nation fails to do this, it will risk deindustrialization as uncertainty over its business environment in the years ahead expands, thus encouraging companies to shift their production bases offshore unnecessarily. Meanwhile, efforts to attract investment and talented personnel to Japan from overseas will run into increasing difficulty.
If this occurs, even if the economy manages to stage a full-fledged recovery, it could turn out to be a jobless one. Over the medium to long term as well, there is cause for concern that economic and social vitality will decline resulting in the loss of job opportunities within Japan. If deindustrialization continues to progress—that is, domestic production remains flat while overseas production rises as a percentage of the total—it is projected that in the five years between fiscal 2010 and 2015, Japan will lose something on the order of 60 trillion yen in domestic demand (by sales) and 3 million job opportunities, resulting in a 5-percentage point increase in the unemployment rate.
2. Early and Steady Implementation of the "New Growth Strategy"
In this context, the government is to be commended for adopting the "New Growth Strategy", which outlines concrete measures to address the key challenges facing the Japanese economy, including quantitative targets and a time framework. If Japan is to achieve sustained economic growth and job creation in today's global economy as it grapples with a dwindling population, a low birthrate, and an aging society, it is vital that the public and private sectors collaborate with speed and a sense of urgency to boldly implement needed budgetary measures, relevant legislative revisions, and regulatory reforms on the basis of the policy directions indicated in the "New Growth Strategy".
3. Boosting Average Nominal GDP Growth by 1.5 Percentage Points and Adding 3.7 Million Jobs by FY 2020
"The New Growth Strategy" incorporates policies to generate new demand and create new jobs together with measures to boost productivity and supply capacity. To estimate how some of the tax changes, public finance and social security reform measures, and administrative and regulatory reforms advocated by Keidanren would contribute to these goals, we performed an analysis limited to such quantifiable measures as a substantial reduction in the corporate tax burden and an increase in the consumption tax rate. The analysis projected that these measures alone would have the effect of boosting average nominal GDP growth between now and fiscal 2020 by 1.5 percentage points, increasing average real GDP growth by 0.3 percentage points, and adding about 3.7 million jobs. Additional benefits could be anticipated through improvements in treasury budget.
Proceeding with these points in mind, the government should exercise "strong political leadership" to achieve its goals of "a strong economy," "robust public finances," and "a secure social security system." In view of the backlog of serious economic challenges our nation faces—notably the worst fiscal position of any advanced industrial nation—there can be no foot-dragging in carrying out the necessary policies. We in the business community call on the government to ensure steady progress along a process timetable toward the targets put forth in the "New Growth Strategy".
4. Business Initiatives for Sustained Growth
In addition to providing goods and services necessary to the people's lives, private business is the source of job creation and other key factors that drive economic growth. For this reason, vital businesses mean stronger economic growth and better lives for our citizens. With this in mind, the business community is committed not only to playing an integral role in the nation's overall economic growth strategy but also to pursuing initiatives originating in private industry to achieve sustained economic growth driven by the vitality of the private sector.