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Policy Proposals  Industrial Policy Proposals for enhancing Japanese companies' competitiveness

April 15, 2014


Thanks to continual management efforts by Japanese companies and to Abenomics, the performance of Japanese companies has been strong. But in order to maintain and enhance their competitiveness in the medium- to long-term, there are many issues that need to be overcome, including restrictions on electric power, slow progress in concluding economic partnership agreements, battered regional economies and a shortage of human resources.

In this proposal, we have compiled Japanese companies' responses and policies we would like the government to implement in dealing with electric power restrictions and inenhancing competitiveness in the Asian market.

1. Companies' response and policies to electric power restrictions

The electric power restrictions (instability of electric power supply, increasing costs to procure fuel, rising electric power charges, etc.), triggered by the Great East Japan Earthquake, have big influence on business activities. Many companies say their self-help efforts have approached their limits, and that if electric power restrictions are prolonged, there are concerns that Japan may see a hollowing out of industry, mainly among sectors that use large amounts of electric power, as companies may make full-fledged moves to restructure their domestic business activities or relocate their operations overseas. Immediately, the government needs to create an environment in which electric power can be supplied at economical prices.

On the other hand, securing electricity and energy is a global issue. Therefore, if this issue is solved, it would enable Japanese companies to lead the world in deploying their energy-saving and energy-generating technologies, products and know-how on a global scale. They can thus expect to acquire new markets. It is necessary to reinforce incentives for companies to proactively engage in research and development of energy-saving technologies, products and systems, as well as to support technological innovation leading to cost reductions for renewable energies and energy-saving efforts. In addition, the public and private sectors must work jointly in promoting efforts toward capturing new markets.

2. Policies necessary for enhancing companies' competitiveness in the Asian market

Amid the intensification of global competition, Asia, which is the growth center of the world, is an extremely important market as well as a production base. To enhance their competitiveness in Asia, Japanese companies are required to improve their ability to create products or service with added value in Japan, where they have accumulated human resources, facilities and knowledge, and to develop their supply chain.

To improve Japan's ability to create added value, it is indispensable to take such measures as regulatory reforms, lowering effective corporate tax rate, social infrastructure developments and attaining business environment where Japanese companies can compete with foreign companies on an equal footing. At the same time, it is important to take measures toward promoting innovation, including reinforcing companies' support toward research and development as well as the government's science and technology policy, reforming the intellectual property legislation, developing global human resources in the field of science and technology, and creating a diverse and flexible working environment.

As for developing supply chain in Asia, it is important to promote the conclusion of economic partnership agreements, tax treaties and social security agreements and to proceed with improving various infrastructure systems toward creating a seamless environment in which people, products and money can move freely. Making efforts of standardization in the sectors of environment, energy, security among others is essential at the same time. In addition, the government is requested to assist the overseas expansion of small and medium-sized enterprises as well as to export Japan's culture. Furthermore, it is essential to maintain good diplomatic relations as a premise for business transactions.

Industrial Policy