- G7 Ise-Shima Summit
- Consumption Tax Increase
- Economic Growth Strategy
- Fiscal Investment
- Recruitment and Employment of New College Graduates
G7 Ise-Shima Summit
At the B7 Tokyo Summit held in April, business leaders from G7 countries shared an awareness that amid uncertain global economic prospects, the G7 should take on the role of driving sustainable and stable worldwide economic growth. The consensus of the B7 was summarized in joint recommendations presented to Prime Minister Abe, which included the views that the G7 should not rely solely on monetary policy, but implement flexible fiscal policy and carry out structural reforms. Prime Minister Abe visited Europe before the summit for talks with G7 leaders and gained basic agreement on promoting well-balanced cooperation on monetary policy, fiscal policy, and structural reforms while reflecting the situation of each country. The same direction was set at the G7 Finance Ministers' and Central Bank Governors' Meeting held at the end of last week. Although there are some differences among countries' policy stances, I hope that Prime Minister Abe's leadership will enable G7 nations to work together toward a concerted policy approach.
Consumption Tax Increase
Consumption has remained subdued since the rise in consumption tax from 5% to 8% two years ago, and never recovered from the reactionary decline that followed a last-minute rise in demand prior to that increase. From the perspective of stimulating consumption and driving economic activity, a consumption tax increase places a heavy drag on the economy. However, maintaining Japan's world-class social security system for the next generation and achieving a primary balance surplus are also crucial issues for the nation. The Japanese business community has consistently emphasized that the government should increase consumption tax to 10% as planned. It is also necessary to create an economic environment capable of withstanding a tax increase by taking every possible measure, such as spurring consumption. However, ultimately Prime Minister Abe will decide the matter by exercising high-level political judgment once he has considered various factors.
Economic Growth Strategy
The draft Japan Revitalization Strategy 2016 compiled recently is an important step towards achieving an economy with GDP of 600 trillion yen. The draft incorporates specific measures aimed at implementation of growth strategies, and it will be important to secure budgets for these measures and carry them out.
The strategy sets out an extensive range of ground-breaking projects, and presents 10 new projects to be jointly implemented by the public and private sectors. Proposals made by the business community have been swiftly reflected in the strategy, and we welcome their adoption. I believe that steadfast implementation of these projects will be a driving force towards achieving an economy with GDP of 600 trillion yen by 2020. Realizing the fourth Industrial Revolution is a particularly crucial challenge. This project is expected to create markets worth 30 trillion yen, and the public and private sectors need to collaborate in driving it forward. The business community intends to promote and cooperate in all aspects of these government initiatives.
In the medium to long term, it is essential to create a business environment conducive to achieving economic growth led by the private sector. In order to increase capital investment from its current level of around 70 trillion yen to 80 trillion yen, the government must place the business environment on an internationally equal footing, through initiatives such as corporate tax reform, tax incentives for research and development, and lower electricity costs. This is the key to invigorating corporate activity. Although steady progress has been made with regulatory reforms, there are still many controls that obstruct business, and the government should drastically reform such regulations. Progress is apparent in several areas including corporate tax reform and the Trans-Pacific Partnership, and if the government can continue to resolve such issues, there will be visible improvement in the business environment. Through policy dialogue with the government, the business community will continue urging it to implement such measures. There is no weakness in the fundamentals of the Japanese economy. If steady progress can be made in creating an appropriate business environment, the economy is sure to be revitalized.
Preliminary GDP statistics for the January-March quarter indicated annualized GDP growth of 1.7%, and other indicators including consumption were also positive, but these trends still lack strength. The previous consumption tax increase was accompanied by several trillion yen in fiscal spending, yet this political treatment was ultimately insufficient. It is vital to generate demand in order to stimulate consumption and promote consumption-driven economic growth. Regardless of political decisions surrounding the consumption tax increase, I believe that piecemeal expenditure will not suffice, and fiscal investment on a dramatic scale is necessary.
Recruitment and Employment of New College Graduates
Under this year's schedule, recruitment campaigns for new college graduates began in March and the selection process, including examinations and interviews, will start in June. The new schedule was devised in consultation with universities and the government to minimize impact on students' studies and alleviate the harmful effects of a prolonged recruitment period. I understand that these changes from last year have improved the recruitment process, and that their effects are becoming apparent. The process is about to enter its key stage, and I intend to watch carefully. The recruitment campaign period is shorter than last year, but overall there is no disadvantage for any stakeholders including students. To fully ascertain the effects of the changes, we will conduct surveys and canvass the views of all those involved in recruitment and selection activities under the new schedule.