Requests to new Cabinet
This morning, I visited Prime Minister Abe at his office together with Chairman Mimura of the Japan Chamber of Commerce and Industry and Chairman Kobayashi of Keizai Doyukai (the Japan Association of Corporate Executives) to deliver each group's written requests to the new Cabinet. Keidanren asked for the comprehensive implementation of economic measures including the acceleration of recovery from the 2011 earthquake disaster, restoration of fiscal health, and realization of regulatory and corporate tax reforms as well as the strong promotion of other steps as part of the 10 key policy issues.
We also expressed our respects to Prime Minister Abe for his leadership and to Minister Amari's efforts on the successful conclusion of the Trans-Pacific Partnership (TPP) negotiations, and told the prime minister that the business community will utilize the TPP to the fullest as the linchpin of the growth strategy and help prompt growth and development of the Japanese economy. In terms of agriculture, we said we will proactively proceed toward cooperation with the farming industry in promoting agriculture as a "sixth industry" (by integrating production, processing and distribution, etc.), promoting exports, strengthening competitiveness, and turning it to a growth industry.
Moreover, we told him that the three new arrows in the second stage of Abenomics reflect Prime Minister Abe's strong resolve and that Keidanren highly welcomes them as they are of the same thought as the Keidanren Vision, and that we expect them to be materialized and be put into action. What is important above all is to build a strong economy and achieve a GDP of 600 trillion yen in nominal terms, so it is necessary to encourage consumption and private investment toward realizing these goals. To build the environment conducive to these moves, we requested that the effective corporate tax rate be lowered to below 30% at an early time, that further regulatory reforms be put forward, and that measures to stimulate consumption and capital spending be implemented. In addition, we told him that the business community will proceed with proactive and aggressive management based on the awareness that companies are the very driving force that is responsible for economic growth.
Assessment of political party policies
We discussed at today's meeting of Keidanren's chairman and vice chairs our assessment of the policies of major political parties and it was approved. As with last year, the format of policy assessment this year involved assessing political parties' actions and achievements based on the provisions of Keidanren's business policy. As a result, we can say that the actions of the ruling parties centering on the Liberal Democratic Party and their achievements, including the reduction of the effective corporate tax rate, the restarting of nuclear reactors whose safety has been confirmed and the conclusion of the TPP negotiations, indicate that key policy issues which are very important for the revitalization of our country's economy have made great steps forward.
Based on them, as this year's policy assessment, we highly value the policies of the ruling parties centering on the Liberal Democratic Party as they have exerted strong political leadership toward revitalizing Japan's economy and have implemented and achieved results in their economic growth strategy and in diplomatic and security measures. As for remaining issues, we expect the ruling parties to vigorously implement key policy issues including continuing efforts to beat deflation and steadily realizing economic revitalization, restoring fiscal health, and addressing population problems.
Keidanren called on its member companies to consider making political donations in September last year as part of their social contributions based on the decision by each individual company. We affirmed this policy at the summer forum in July and decided to act under the same policy this year as well. While Keidanren will call on them to make political donations, it is up to each company to decide which political party to donate to, and we will provide them with our policy assessment for each political party as guidance material. Our policy assessment shows what actions political parties took and what kind of achievements they have made, based on Keidanren's business policy.
Specifically, we will make necessary revisions to our views concerning reinforcing cooperation with politics, which we presented in September last year, and renew our calls to member companies and organizations.
We have no intention whatsoever of making political donations for rewards. Political donations will be made as part of our social contributions, and we have no plans to engage in an activity in which we try to seek some kind of profits through political donations. The point of the matter is that we will firmly maintain a free economy while promoting the growth strategy, and support political parties that work on revitalizing the Japanese economy.
It is now a crucial time for beating deflation and revitalizing the economy. That is the very reason that the political and business sectors must work together as a pair of wheels and in the same direction. There is no change in this basic recognition and stance. A pair of wheels moves in the same direction, with each wheel maintaining a certain distance from the other. To continue the momentum of the economy, which has finally started looking upward, the political and business sectors must work as one in moving forward with economic revitalization.
Companies' retained earnings
It is true that retained earnings of companies are expanding along with growth of performance. But there may be a misunderstanding. Retained earnings are not necessarily in the form of cash and deposits, but they are also utilized in various business activities like capital spending or mergers and acquisitions. Business community recognizes that retained earnings are increasing, and is aware about further utilizing them proactively through business expansion and growth investments.
Corporate tax
The specific discussion concerning when to reduce the effective corporate tax rate to below 30% will start soon. But because the schedule through fiscal 2016 is set under the tax reforms of last fiscal year, we are hoping that it would be lowered in fiscal 2017 as the earliest possible timing. The discussion on funding has also not yet begun but in general terms, we think there can be advanced tax cuts to an extent without being too particular about revenue neutrality.
Consumption tax
Keidanren believes the consumption tax should be uniform when raised to 10%, and we are against having multiple tax rates. There are various reasons for this, including that it would reduce tax revenues, but the biggest one is that it would significantly increase the administrative workload of small and medium-sized business operators. Measures to help low-income earners should be in the form of providing some kind of simple benefits.
Exporting infrastructure
Exporting infrastructure is a large pillar of the growth strategy, and the Abe administration is going all-out in working on this area. The recent result regarding the order to build a high-speed railway in Indonesia was very disappointing because it was a key test in this field. But we think there were limits to what Japan could do under the current mechanism. As cases of exporting infrastructure increase from now on, Japan cannot avoid competition with China and other countries. It is necessary to deepen our discussions and step up our efforts for future measures. We need bold actions.
Chinese economy
China is a vast country with a huge population, and it is not easy to speak about its economy in simple terms. There are good and bad economic situations depending on the region and on the industry. The Chinese economy is indeed on a slowing trend, but we see the broad trend as moving within the framework of a new normal, so there is no need to look at it in an overly pessimistic way.
Japan-Iran relations
It was desirable that a final agreement was reached on the Iranian nuclear issue in July. I am not aware of the details of the Japan-Iran investment agreement, but in general terms, I think a bilateral investment agreement contributes to the expansion of economic relations. It is important for Japan and for the business community to make bilateral relations with Iran good.