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Executives' Comments  Press Conferences Chairman Sakakibara's Statements and Comments
at His Press Conference

March 22, 2016

Consumption tax hike

At the recent meetings of the government's International Finance and Economic Assessment Council, experts spoke both for and against the planned increase in the consumption tax rate on the basis of the latest economic situation. As a whole, we believe it safe to say that concerns were expressed over the current trend of consumer spending, which stays sluggish, hovering around 300 trillion yen a year, due to a decline in demand following swollen last-minute spending just before the last consumption tax hike. Consumer spending has been lackluster for nearly two years, and many economists single this out as a reason for being cautious toward the planned additional increase.

The consumption tax hike scheduled next year is something to be judged and determined eventually by Prime Minister Shinzo Abe, but Keidanren considers that the consumption tax rate should be raised to 10% in April next year as scheduled from the perspective of improving social security and restoring sound public finance. Meanwhile, it is necessary to take policy measures to prop up consumption as part of efforts to improve the economic environment in a manner conducive to the planned tax hike.

Economic pump-priming measures

With the national budget for the next fiscal year set to pass parliament within the current fiscal year ending on March 31, we are now at a stage where we should consider what policy measures should be taken next. In order to raise the consumption tax next year as scheduled as well, we need to take steps to support economic activity. It is essential to adopt pump-priming, consumption-stimulating measures, including fiscal spending. It is also necessary to show the rest of the world Japan's posture to lead world economic growth at the Ise-Shima Summit of seven economic powers, to be hosted by this country in May, by hammering out demand-stimulating measures. We consider it a natural choice to come up with a sweeping package of economic pump-priming measures ahead of the summit.

It is important to put into place an economic environment conducive to the consumption tax increase. We should do something to address the current situation of consumer spending mired in a standstill. We should boost consumer spending from the current level of 300 trillion yen to around 360 trillion yen to help realize the government-set gross domestic product (GDP) target of 600 trillion yen a year as well. It is necessary to fix specific consumption-stimulating measures, including fiscal spending, in a public-private joint effort outside the dimension of the consumption tax hike.

Monetary policy

In December 2012, the Abenomics package of economic measures was put into motion and the "three arrows" of fiscal stimulus, monetary easing and structural reform were mapped out. Both stock market prices and foreign exchange rate levels have since improved remarkably. Gross national income has also increased by about 40 trillion in nominal terms, creating more than one million jobs additionally. These are the outcome of the Abenomics as a whole indeed, but the Bank of Japan's monetary policy has played a great role in this respect. The yen has appreciated and stock prices are fluctuating wildly these days. However, this is not because the fundamental strength of the Japanese economy has been spoiled but because the markets have reacted excessively to such factors as decline in crude oil price and concerns over slowing economic growth in China and other emerging countries amid global financial and capital market fluctuations.

The other day, the Bank of Japan introduced new measures, including the negative interest rate policy. We take them as the central bank's strong commitment to achieving targeted commodity price increases.

Spring labor-management wage talks

The annual round of wage hike negotiations is still under way but what is most important is to continue the momentum of pay increases in the past two years into this year. We called for wage increases in excess of the previous year's results on an annual income basis in this year's report by the Committee on Management and Labor Policy. Since the day designated by the labor side for management responses to demands for higher pay, many companies have offered wage scale hikes for the third straight year and greater bonus and other lump-sum payments than last year, with moves spreading to boost annual income-based pay. We regard these as favorable moves toward three consecutive years of wage increases.

We have also called for the employment of non-regular workers as permanent staff and other comprehensive measures for better treatment, not just pay scale and bonus increases. In this year's labor-management talks, companies offered various benefits for workers, including greater pay hikes for non-regular employees than for regular employees, improved treatment of rehired elderly workers, shorter regular working hours, expansion of a paid-leave system for nursing and health care, and relaxation of requirements for stay-home work. These resulted from the labor-management exercise of wisdom and joint efforts for comprehensive improvements in treatment. If this momentum is continued by companies yet to offer responses to labor demands, including small and medium-size enterprises, the economy's virtuous cycle will gain speed and expand. We hope that companies will continue to offer from now on positive responses matching their individual earnings.

The government requested efforts for increased wages on various occasions. We take the move as a request from society as a whole to ensure a favorable economic cycle and push ahead with an exit from deflation and economic rebirth. Breaking away from deflation and revitalizing the economy are the most important challenges faced by this country. We think for now that companies have offered wage hike responses fully taking such a request from society into account.

Compared with last year's spring round of labor-management talks, this year's round was undertaken in a totally different economic environment. Last year, high-level pay scale hikes were offered amid an economic upturn. But this year's negotiations were conducted amid uncertain economic prospects, even though not in the face of a downturn. The implementation of wage scale increases for the third year in a row under such a situation will be a major incentive to expand consumer spending. We understand that wage levels have been raised for sure.

Relocation of gov't organs to regions

There will be no rebirth of the Japanese economy without regional vitalization. We regard as a great step forward the decision to relocate the Cultural Affairs Agency to Kyoto as part of regional vitalization and we would like to give the move high marks. We keep a close watch on similar plans for future, including the relocation of the Consumer Affairs Agency to Tokushima Prefecture and that of the Statistics Bureau of the Internal Affairs and Communications Ministry to Wakayama Prefecture. The government is expected to make decisions on both of them as soon as the end of August. We hope the government will promote the regional relocation of other government organs concerning some of their sections that can be moved.

Improving regional corporate footholds is another important theme. In this connection, Keidanren set up a committee on the revitalization of regional economies in June last year and laid out a "Keidanren action program for regional revitalization" in September. At present, we are tackling specific themes such as the enhancement of regional corporate bases, the flow of human resources from major companies to regions and the employment of workers as regular staff with job responsibilities limited to regions. We would like the government to put into shape an environment making these activities easier. Furthermore, the concentration in Tokyo of the functions of government ministries and agencies constitutes some hindrance to companies relocating functions to regions. The regional relocation of government organs is an important challenge and it is essential to promote it in a concerted effort by the public and private sectors.

Injunction on Takahama nuclear reactors

We refrain from commenting on individual court rulings but, generally speaking, we think nuclear power plants that have passed safety screening by the Nuclear Regulation Authority, which comprises experts, should be allowed to go into operation on the basis of the so-called S+3E principles (safety + energy security, economic efficiency and environmental conservation). It would be problematic for electric power operators to be forced to suspend a nuclear plant after passing safety screening because business foreseeability is lost.

Executives' Comments