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Policy Proposals  Comprehensive Strategy Enhancing Competitiveness and Achieving Growth FY 2013 Organization Policy

June 4, 2013

Since the inauguration of the Shinzo Abe administration late last year, there has been a correction of the excessive appreciation of the yen and a recovery in share prices. Along with the announcement of Japan's participation in the Trans-Pacific Partnership negotiations, encouraging signs are beginning to appear in the Japanese economy. Whether these developments will pull Japan out of deflation and lead to a full-fledged economic revival will hinge on the success of growth strategies. An important period for Japanese economic development has started.

Now is the time to boldly implement policies to boost the economic dynamism of companies and individuals and to enhance industrial competitiveness. The aim of such efforts should be to achieve firm economic growth of around 3% in nominal terms.

We at Keidanren, as an organization of substantial action for economic and social prosperity, will spearhead efforts to improve the standard of living and to create employment opportunities by strengthening its partnership with various stakeholders inside and outside Japan. We will vigorously press for solutions to the key issues listed below and promote a variety of initiatives, such as our Future City Model Projects and the development of world-class human resources, in order to achieve sustained, private-sector-led economic growth. We will also insist on policy-centered politics that can serve the nation's and people's best interests.

1. Accelerating Reconstruction

Restoring people's livelihoods and industries in areas affected by the March 11th earthquake and tsunami, despite the passage of more than two years, is an urgent priority. All measures should be promptly taken for the full-scale implementation of community reconstruction plans; restoration of agriculture, forestry, fisheries, and other key industries in the affected regions; and the promotion of private-sector investments in new businesses, such as by enhancing the control tower functions of the Reconstruction Agency and by greatly expanding and enhancing the flexibility of the system of special reconstruction zones and simplifying relevant procedures. The aim should be to turn the affected areas into a center for advanced industries, heralding a new age for the Tohoku district and, in the end, contributing to the revival of a dynamic Japan.

The nation as a whole should step up its disaster-prevention and mitigation measures and shore up local infrastructure, while individual companies and the economic community should reinforce their business continuity plans.

2. Improving the Business Climate to Maximize Private-Sector Dynamism

To revitalize the economy and achieve growth, there is a need to secure a business climate that is on an equal footing with international standards and, further, that encourages private businesses to become global pioneers by initiating original and creative approaches and by increasing their productivity. Companies will promote innovation to create opportunities for growth and to cultivate new markets.

(1) Implementing Bold Regulatory and Institutional Reforms

Drastic regulatory and institutional reforms should be implemented to promote the use of new technologies in such areas as information and telecommunication, medical and nursing care, and environment. Such reforms are also required to turn agriculture into a growth industry. Comprehensive special zones should simultaneously be further advanced to establish a world-leading business climate that will lead to the spawning of new markets.

(2) Strengthening Science and Technology and Revitalizing Industry

In addition to strengthening the control tower functions of the Council for Science and Technology Policy, the government's research and development (R&D) investment should be raised to 1% of gross domestic product, and basic research contributing to the solution of various social issues should be upgraded. The development of high-level science and engineering human resources should also be reinforced.

The government should make a firm commitment to develop and implement policies for industrial competitiveness, which cover all aspects of corporate activity, from production and marketing to logistics. The government's support is also crucial for the smooth corporate use of public data, the establishment of proper balance between the protection and utilization of personal data, and the active promotion, especially in foreign markets, of such industries as tourism and the creative or cultural industry.

(3) Securing a Stable Supply of Low-Cost Energy

The process of restarting nuclear power plants should be accelerated when their safety is confirmed and local approval is granted. In addition, world-leading nuclear-related technologies, including those for nuclear safety, should be strengthened. Renewable energy, meanwhile, should be promoted through R&D and deregulation, while reexamination should be made of the existing system for feed-in-tariffs, which will invite a heavier national burden, and the global warming tax. Low-cost and stable procurement of fossil fuels should be secured and, at the same time, they should be utilized with greater sophistication using new technologies, such as carbon dioxide capture and storage (CCS).

As for medium- to long-term energy policy, reasoned debate based on a sober assessment of reality should aim to strike a proper balance among national security (supply stability), economic, and environmental concerns by maintaining access to diverse energy sources, including nuclear energy. At the same time, there is a need for a fundamental reexamination of climate change measures.

(4) Advancing Tax, Fiscal, and Social Security Reforms to Encourage Growth

To create jobs through the revitalization of corporate activity, a clear path must be promptly outlined for sweeping reforms of corporate taxes to lower Japan's effective corporate tax rate to 25% in line with those of neighboring Asian countries. In addition, tax incentives to encourage R&D and utilization of intellectual property rights must be expanded, while tax relating to autos and housing need to be simplified and their burdens rolled back.

The social security system should be reformed so that it is compatible with growth, building upon the core concept of self-help and advancing further streamlining and prioritization of benefits while promoting good health and long life in society. This will ease the social security burden of the working population and corporations and achieve a more equitable balance among personal, mutual, and public assistance efforts. The consumption tax needs to be steadily raised in order to restore fiscal health and prevent shackling future generations in debt; this should be premised on acquiring the public's understanding and consent by indicating a clear, medium-term roadmap toward fiscal rehabilitation. The identification number system for taxation and social security services should be introduced without delay and effectively utilized.

(5) Creating an Environment in which Diversified Human Resources Can Show Their Abilities

Individuals must be able to find work befitting their lifestyle and allowing for the maximization of their capacity. This is a prerequisite to the economic growth of Japan in the midst of a falling birthrate and a graying, dwindling population. The labor market should thus be made more flexible to diversify and expand employment opportunities, particularly for young and female workers, and to facilitate labor mobility. Government and business should work together to help halt the falling birthrate, such as by addressing the issue of wait-listed children at nurseries, and companies should proactively support the advancement of women in the workforce.

Educational reform must be advanced to foster human resources with entrepreneurial passion capable of achieving success on the global stage. Companies, on their part, should actively nurture and employ such human resources.

(6) Meeting Global Demand and Growing with the World

Economic diplomacy should be strengthened to promote economic partnerships and integration. Through acceleration of free trade talks for the Trans-Pacific Partnership (TPP), the Japan-China-South Korea Free Trade Agreement, the East Asian Regional Comprehensive Economic Partnership (RCEP), and the Japan-the European Union Economic Partnership Agreement, Japan should take a leadership role in the creation of a Free Trade Area of the Asia-Pacific (FTAAP) and other global rule-making initiatives. These efforts will help stabilize international relations and open up a path to growth as a trade-oriented nation.

Government and industry should collaborate to export infrastructure systems and equipment to emerging economies and other countries. Japan's world-leading technologies and know-how, such as those for energy conservation, de-carbonization, and environment-friendly agricultural production should be provided to such foreign markets. Governmental strategic efforts should be conducted to utilize Japan's technologies, standards, certification, and institutions to establish international standardization covering the entire supply chain. The conclusion of governmental investment and social security agreements could facilitate international operations of corporate activities.

3. Accelerating the Introduction of the Doshu-sei to Revitalize Regions and Local Areas

The revitalization of the regions and local areas, where people live and companies carry out their activities, is indispensible for the growth of the nation as a whole. The basic law to promote the reorganization of the current prefectures into larger administrative regions, or the Doshu-sei, should be enacted promptly because it will enable the regions to make choices on their own responsibility to maximize their latent potential and strengths.

At the same time, the decentralization of administrative power, which is a prerequisite for the introduction of the Doshu-sei, must be advanced with greater urgency. Authority, revenue sources, and administrative functions should be boldly transferred from the national to the prefectural and municipal levels to eliminate waste from administrative overlap. This will contribute to governmental efficiency and fiscal rehabilitation so that revenues can be channeled into activities for further growth. In particular, the requirements for the application of the act on promotion of special districts for regional government should be eased for industrious wide-area local government bodies, thus accelerating the transfer of authority. E-government should also be actively promoted.

Comprehensive Strategy