New three arrows of Abenomics
The numerical targets of achieving 600 trillion yen in GDP, maintaining a population of 100 million and attaining a fertility rate of 1.8, which are laid out here, are also mentioned in Keidanren's Vision, so we are on the same page. The new three arrows -- a strong economy, child rearing support and improved social security -- clearly indicate the strong will of Prime Minister Shinzo Abe to place the economy as the top priority, and we can feel his extraordinary enthusiasm. The broad direction and numerical targets are appropriate, and it is important from here on to come up with specific policies toward realizing them.
As for achieving a GDP target of 600 trillion yen, we have not reached the levels of 3% nominal growth and 2% real growth in the economy that are necessary to realize this target, but it is attainable as Keidanren's Vision also calls for a GDP target of 595 trillion yen. We believe it is an ambitious goal. The business community will also work hard toward realizing it.
Concerning the source of funding for supporting families raising children, we believe childrearing support is an important national policy and it should basically be financed by taxes. The fact of the matter is that the corporate burden of social insurance costs has reached its limits. Even if they raise wages, more than half the amount goes toward paying social insurance costs. Despite having raised wages for two consecutive years, the move has not led to significantly encouraging consumer spending, so we think the burden of social insurance costs are that big. Increasing the burden further would have negative effects on the economy.
Economic situation and economic measures
Capital spending has also increased in this year's statistics, but further expansion is desired to keep the virtuous economic cycle going even stronger. As companies' retained earnings are increasing and corporate performance is robust, we believe that capital spending that contributes to the improvement of productivity should be aggressively carried out.
From here on, it is important to work on building a strategy toward the second stage of Abenomics through occasions such as meetings of the Council on Economic and Fiscal Policy, public-private sector dialogue, and government-labor-management meetings. We particularly hope institutional reforms that encourage growth will be executed. Specifically, we expect to see comprehensive progress in the areas of reducing the corporate tax rate, regulatory reforms in agriculture, utilization of foreign human resources and measures to encourage consumer spending.
Aiming for an even higher level of a virtuous economic cycle, Prime Minister Abe has requested continuous wage increases, switching the status of non-regular employees to regular employees, and expanding investments from the private sector. We recognize these requests as necessary steps, but the government also needs to improve the environment to realize them.
Measure to decrease burden arising from increase in consumption tax
Keidanren opposes the introduction of reduced tax rates and believes that a uniform tax rate should be maintained. The biggest reason for this is that reduced rates significantly increase the administrative workload on small and medium-sized companies as well as microenterprises. As measures to help low-income earners, some kind of benefit measure is desirable. We recognize a reduced tax rate system in the Japanese way proposed by the Ministry of Finance as one approach that goes along the lines of Keidanren's recommendations.
We were strongly hoping for a broad agreement to be reached at the ministerial meeting in Hawaii in July, but it did not happen. We believe a meeting of Trans-Pacific Partnership trade ministers in Atlanta scheduled from the end of this month will be the last opportunity. The major issues have been narrowed down to three areas -- dairy products, automobiles and intellectual property. We hope the ministers will see things from a broad perspective and aim to reach a final agreement.
If they miss this opportunity, there are views that further moves to conclude an agreement would be delayed in terms of years because of upcoming successive political events, such as the general election in Canada and the presidential election in the United States. We strongly expect they will come to a broad agreement this time at all costs.
Keidanren will also send Vice Chair Iijima and Trade and Investment Committee Chair Nakamura to Atlanta to give a big boost toward an agreement in the negotiations.
Recruitment and employment of new college graduates
Activities for recruiting and employing new college graduates under new guidelines started this fiscal year, and companies began publicity activities in March and their employment screening in August. However, we are hearing various views on the matter including that this has prolonged the period of time students are bound by the overall process and that small and medium-sized companies are having trouble moving ahead with the hiring activities. To get an accurate picture of the actual situation, we have been conducting a survey among member companies from last week. After tallying and analyzing the responses in mid-October, we plan to consider ways to handle the situation. It seems the Ministry of Education, Culture, Sports, Science and Technology is also conducting a similar survey, so we will coordinate closely with the government and universities to work on grasping the actual situation under the new guidelines as a starter.
And if there are problems, we hope to make some kind of improvements. As for next fiscal year, it is not clear how much maneuvering space we have because preparations are already under way and there are practical constraints. But if improvements are absolutely necessary, one of our options is to go ahead and implement them.
In September last year, we asked member companies to consider whether to make political donations as part of their social contribution based on the judgment of each company. At the time, we presented Keidanren's policy assessment as a resource on which they can base their decision. We reconfirmed this broad direction at our summer forum held in July and will continue this stance this year. We will discuss our policy assessment and how to address this matter with our member companies at the meeting of chairman and vice chairs in October.
Responding steadily and making preparations to protect people's lives and property as well as peaceful living are the most important responsibilities of a country. The business community welcomes the recent enactment of the security laws. We hope that our country will contribute even more to peace and prosperity of the international community based on the concept of "proactive contribution to peace."
We cannot say that the enactment of this legislation has gained the full understanding of the public. As Prime Minister Abe has noted, we hope the government will sincerely and persistently repeat its explanations to the people.
Overseas transfer of defense equipment
On September 15, Keidanren announced its proposal for executing the policy for the defense-related industry. In it, we assert that overseas transfer of defense equipment should be promoted as a national strategy under the management and involvement of the government.
International joint development, production and supplying of defense equipment contribute to the enhancement of security relations between countries. It is important for Japan to come up with its own strategy in response to respective partner countries, spelling out what kind of technology and equipment should be supplied to which country. We think that basically, the government should allow the supplying of equipment only when doing so would contribute to our country's security and to international peace.
As the three principles on transfer of defense equipment and technology say, the premise calls for strict oversight of the possibility that a country that is supplied with equipment from our country might use it for purposes other than the original intent or transfer it to a third party. Based on this premise, we need a mechanism within the framework of intergovernmental defense equipment accords that includes the concept of regional security as well as the procedures for transferring equipment and technology by the public and private sectors in response to the situation of the partner country.
Further, these recommendations are not directly related to the enactment of the security laws and we do not bear in mind its economic impact. Transfer of defense equipment should be carried out for no other purpose than to contribute to peace for Japan and the world.