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Policy Proposals  Comprehensive Strategy Achieving Japan's Revitalization by Fostering Economic and Social Innovation FY 2014 Organization Policy

June 3, 2014

The Abe administration's economic policies are bearing fruit, ushering in the start of a virtuous economic cycle towards Japan's emergence from its deflationary phase. There is now a golden opportunity for Japan's revitalization. The most pressing issue today is that of not missing this opportunity, and of placing the Japanese economy back on a path of full-scale growth. Through economic growth, Japan must not only enhance its own citizens' standard of living and strengthen safety nets for its entire society, but also attract investment and human resources from the world, and open up its potential for ongoing development. It is also essential for the government and private sector to work together to address the problems of Japan's low birthrate and its aging and declining population, making every effort to achieve sustained nominal growth at the 3 percent level.

This comes at a time when the holding of the Olympic and Paralympic Games has been awarded to Tokyo. This offers Japan an excellent opportunity to utilize the period until then as a period of concentrated effort to lay the foundations for sustained growth, proceeding boldly with economic and social innovation, including regulatory and institutional reform. In that way it is incumbent upon us to create a new Japan: a vigorous and attractive land of plenty that plays a leading role in the development of the global economy.

Politics and economics are two sides of the same coin, and on the political side it is to be hoped that maximum priority will continue to be given to economic revival. For companies it is important that they be ever-conscious that they constitute the core component of the growth strategy, and that accordingly they are proactive in their own management. For our part, Keidanren will remain active in framing policy recommendations to help ensure the steady and rapid achievement of the government's Japan Revitalization Strategy. To that end we will deal head-on with the issues set out below, working vigorously towards the achievement of sustained growth and a high standard of living.

1. Acceleration of post-earthquake reconstruction

Today, in the latter half of the Concentrated Reconstruction Period (FY 2011-15; following the Great East Japan Earthquake in the Tohoku region), people are questioning whether the inhabitants of disaster-stricken regions are experiencing tangible results. Priority should be given to inputting resources of all kinds and implementing measures for such purposes as accelerating urban-development works and rehabilitating local industries. It is important to show Japan and the world at large the prospect of a "New Tohoku" as a region of creativity and potential.

To that end, in addition to working to strengthen the structure necessary for moving reconstruction work forward and to bring about improvements to those projects, Keidanren will continue to join hands with its member companies to cooperate with efforts being made by the national and municipal governments and citizens in the stricken areas. It will also actively lobby all concerned parties for such purposes as the improvement of the business environment in affected areas, including by promoting the use of the system of Special Zones for Reconstruction.

For the revitalization and reconstruction of Fukushima, it is essential that the government be at the forefront in making solid progress, giving maximum priority to addressing decommissioning and water pollution, decontamination, and similar measures. In addition, in conformity with measures such as the plan for industrial revitalization under the Act on Special Measures for Fukushima Reconstruction and Revitalization, Japan must accelerate the revival of the agriculture, forestry, and fisheries industries, the creation of new industries such as those in the field of renewable energy, and the relocation of companies.

2. Firm implementation of growth strategies

With the virtuous cycle towards the revival of the Japanese economy now under way, growth strategies such as the government's Japan Revitalization Strategy should be implemented actively. To achieve sustained growth it is important to enhance the strength and capabilities of companies and individuals and to deploy them to the maximum extent.

Based on the success of projects such as the Future City Model Projects, the business community will take the initiative in actively implementing growth strategies. For that purpose, the structural problems affecting Japan must be eradicated, and a solid foundation must be created to raise the people's standard of living through sustained growth. We will endeavor to inform people widely as to our efforts in this regard to gain their understanding.

(1) Enhancing the strength of companies and individuals, and deploying it to the maximum

(a) Accelerating science, technology, and innovation

A driving force for sustained growth is to channel scientific and technological excellence into innovation. Through the development of the world's most advanced technologies and the evocation of unprecedented concepts, companies have a duty to create new goods and services and to supply them to markets. In order to support such activities, steps should be taken to ensure that targets laid down in the 4th Science and Technology Basic Plan are attained, in particular those of increasing governmental R&D investment to 1 percent of GDP, and enhancing the development of outstanding human resources in the field of science and technology. In addition, industrial use of public data, the use and application of personal data (premised on the protection of personal information), acceleration of utilization of cloud technologies, etc., will lead to the creation of new industries and business activities.

(b) Promoting the advancement of women in the workforce and humanresource development

In order to achieve economic growth amid trends such as the declining birthrate, the aging of the population, and globalization, it is important for Japan to nurture global human resources and develop an environment that facilitates active participation by all people. Enabling more women to exercise their capabilities to the maximum extent will make a particularly large contribution to achieving sustained economic growth.

To that end, to promote the advancement of women in the workplace we will assist companies in devising voluntary action plans to address this issue, and we will call for necessary reforms to be made in elementary, secondary, and university education. We will also endeavor to eradicate hiring mismatches that primarily affect the young, to diversify job opportunities, and to facilitate labor mobility by building a flexible labor market.

(c) Advancing globalization

To reach a rapid, high-standard agreement in the Trans-Pacific Partnership (TPP) negotiations and promote economic partnership negotiations with the EU as well as China, the Republic of Korea, and other Asian nations with which Japan has not yet concluded an EPA, Keidanren will deepen its coordination with governments, related organizations, and other parties in the relevant countries or regions, and will play an active role in various ways, such as by taking the lead in rule-making. We will also endeavor to improve and strengthen relationships with neighboring countries.

For the promotion of infrastructure exports to emerging economies and other countries, Keidanren will intensify its links with the government and endeavor to have ODA revised and financing, insurance, and guarantee systems strengthened. Also, through technical cooperation we will help to develop related institutions and systems locally in those countries.

In order to attract, people, goods, money, and information to Japan, we will endeavor to enhance the domestic living, working, education, and business environments. We will also take active steps to convey to the world Japan's charm and its philosophy and ideals, enhancing the strength of the Japanese brand in such fields as the environment, medical care, and agriculture.

(d) Nation-building for the future

The holding of the Tokyo Olympics and Paralympics should provide an opportunity to engage in new nation-building in which we aim to both to accomplish the reconstruction of the Tohoku region and establish ourselves as a resilient nation that is vigilant with regard to disaster prevention. Moreover, Japan will aim to become a higher-level tourist destination by such means as attracting 20 million overseas visitors and giving them an enhanced degree of satisfaction.

(e) Making agriculture a growth industry

Agriculture plays a major role as a core industry in regional economies and societies As such, agriculture should be made more competitive and converted promptly into a growth industry. For that purpose, we will foster the securing of personnel well-endowed with management expertise, steps to promote consolidation of farmland, and the expansion of the scope of management, and also further strengthen measures to increase collaboration and cooperation between industrial and agricultural circles.

(f) Promoting regulatory and institutional reform as well as administrative reform

Regulatory and institutional reform is of vital importance, for example for encouraging innovation by liberating the ingenuity of the private sector, for speeding up reconstruction, and for promoting regional revitalization. It is particularly indispensable to radically revise regulations concerning information and telecommunications, medical care and nursing care, agriculture, urban development, and other fields where future growth and substantial economic impact are projected.

Furthermore, to strengthen Japan's international competitiveness and open up business frontiers, systems such as National Strategic Special Zones, the Special System for Corporate Field Tests, and the System to Remove Gray Zone Areas should be applied vigorously and effectively. Reform of systems such as the worker dispatching system and working hour system will also be required. Keidanren will be lobbying actively for these changes to be made.

In parallel with the above, persistent efforts must be made to bring about administrative reform. This encompasses advocacy of electronic administrative services, including the radical overhaul of business processes, and the enhancement of administrative efficiency through the use of an identification number system for taxation and social security services.

(2) Building of a socioeconomic base that contributes to growth

(a) Lowering of effective corporate tax rates

Amid the globalization of corporate activity, placing Japan's corporate tax system on an equal footing internationally is a prerequisite for the maintenance of domestic manufacturing and development bases and for promoting investment both domestically and from overseas, thereby encouraging the virtuous economic cycle.

Keidanren envisages the desirable configuration of the entire system of corporate tax. It is mindful that Japan's corporate tax rates are currently at the highest level in the world. Keidanren is taking steps to gain broad recognition of, and support for, the need to promptly find a way to reduce the effective corporate tax rate to the 25 percent level.

(b) Ensuring stable and economical energy supplies

Energy constitutes the basis of people's daily lives and of corporate activity. It is essential to secure a variety of energy sources, including nuclear power, in order to ensure low-cost, stable energy supplies. In view of this, in order to accelerate as much as possible the process of restarting the operation of nuclear power stations, premised on their safety, Keidanren is making approaches to all interested parties while at the same time working to increase the public's understanding and support. We expect the government to take the lead in resolving the issue of final disposal of radioactive waste.

At the same time, the development of innovative energy and low-carbon technologies and the revision of the feed-in tariff scheme for renewable energy and the tax for climate change mitigation must also be addressed. The ultimate aim is to ensure a balanced energy mix that combines stable and economical procurement of energy resources with environmental compatability. When reforming the electric power generation system, the reform should ensure the stable and economical supply of electric power. In addition, it is also essential for public and private sectors to cooperate and encourage people to take energy-saving measures within their own homes.

(c) Addressing the problems of Japan's low birthrate and its aging and declining population

With regard to the increasingly severe problems of Japan's low birthrate and its aging and declining population, study will be devoted both to their impact on the Japanese economy and to countermeasures. In this process, Keidanren will advocate not only the improvement of the child-rearing environment, but also measures such as the acceptance of a broad range of people from overseas, taking as reference other countries' immigration policies.

(d) Promoting fiscal soundness and the reform of the social security system

With regard to the restoration of fiscal health, Keidanren will urge reform in both annual expenditure and revenue based on a balance with economic growth, mapping out a route that will see the achievement of a primary balance surplus by the 2020 fiscal year.

In order to enhance the sustainability of social security that gives people peace of mind, greater importance should be given to social security benefits and to the efficiency of their management, including by the use of an identification number system, while first steadily raising the rate of consumption tax to 10 percent.

To prepare for the rapid aging of society, the structure of funding for the medical care system for the elderly must be subject to radical reform, and companies themselves should regard the maintenance and advancement of employee health and on disease prevention as an important management task.

(e) Promoting the introduction of a do-shu system and decentralization reform aimed at revitalizing the Japanese regions

The revitalization of Japan's regional economies is indispensable for achieving a virtuous economic cycle that encompasses the entire nation and its regions. In order to invigorate regional economies while confronted by difficult issues such as population decline and a worsening fiscal situation, collaboration based on regional core cities, activities by local middle-market companies, and private sector participation through private finance initiatives (PFIs) and public-private partnerships (PPPs) are vital.

In addition, in order to enable regional management to be conducted flexibly based on local choice and responsibility, Keidanren will advocate the introduction of a do-shu system entailing the integration of prefectures into states, and will step up its political lobbying aimed at the early passage of a basic law for promoting the do-shu system. As a prerequisite for the introduction of such a system, Keidanren will simultaneously urge reforms aimed at implementing decentralization.

Comprehensive Strategy