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at His Press Conference

November 7, 2016

Spring Labor-Management Wage Dialogues

Today I discussed basic policy for next year's spring labor-management wage dialogues with Keidanren Vice Chairs. The key view expressed was the need to maintain momentum for wage rises, in light of social demands to bring about a virtuous economic cycle. Given the tendency to focus on figures such as single-year percentage increases in wages, we also talked about the importance of comprehensive discussions in spring labor-management wage dialogues encompassing medium-term improvements to employee terms and conditions, allowances, bonuses, work-life balance, and leave entitlements.

Over the past three years annual wage rises have exceeded 2% at large companies and been around 1.8% at small and medium enterprises, yet there has been no upswing in the real economy or personal consumption. Two factors lie behind this stagnation: more than 40% of any wage increase is swallowed by higher social security premiums, and pay rises do not fully flow through to consumption because people are anxious about the future and the burden of educational expenses. The view was expressed that comprehensive government measures such as study grants will be required to turn around this defensive mindset currently constricting household consumption. Another idea mentioned was that companies should encourage consumption by boosting the proportion of wage increases allocated to young employees and households with children. The Keidanren Committee on Labor and Management Policy will discuss these suggestions further and finalize the management stance in January 2017.

Since this year's corporate management environment is generally less favorable than last year's, some companies are likely to take a conservative approach, but if we look at the medium term rather than just this year, a high level of earnings has been achieved over the last few years. It is not simply a matter of refusing to raise wages because corporate results were poor this year. Companies need to consider wage rises in the context of their medium-term performance. Although spring labor-management wage dialogues are ultimately negotiations between labor and management in each company, consistent with our earlier calls for companies experiencing earnings growth to raise base salaries this year, Keidanren intends to set a common direction for next year.

Working Style Reform and Work-Life Balance

Employees must never die from overwork. Keidanren has designated 2016 as the year for focused efforts to reform working styles and establish a work-life balance for employees. Breaking away from long working hours is a cornerstone of these efforts, and top managers must display leadership and steadily strive to achieve this change. Keidanren will continue taking every opportunity to call upon employers to re-shape the current culture of long working hours.

Revisions to Article 36 Agreements on working hours must reconcile two different perspectives: protecting workers and ensuring business continuity. For example, industries such as construction and transport have busy periods, and these need to be taken into account. At the same time, it is essential to consider employees, particularly in terms of health care.

Corporate Internal Reserves

The term "internal reserves" gives the impression that companies are hoarding cash, but this is not the case. Internal reserves are accumulated after taxes and dividends are subtracted from profits, and are used for overseas investment and M&A activity, leading to corporate growth. In government statistics, they contribute to gross national income (GNI). Cash and cash equivalents constitute around 200 trillion yen of a total of about 378 trillion yen in internal reserves, and this represents six to eight weeks of corporate working capital. It is natural for companies to hold appropriate amounts of working capital, and these levels are by no means excessive.

Trans-Pacific Partnership

The Trans-Pacific Partnership (TPP) is a key pillar of Japan's growth strategy, and the extraordinary Diet session needs to approve it as quickly as possible. Swift approval by Japan is also important for boosting the ratification process in the United States. In the aim of rapidly bringing TPP to fruition, four business groups (Keidanren, the Japan Chamber of Commerce and Industry, the Japan Association of Corporate Executives, and the Japan Foreign Trade Council) issued a joint statement in July, and the business community has urged executives of the ruling party to expedite approval. TPP is a matter of vital interest to business, and I hope it will be approved as quickly as possible. The government and the ruling party should address this crucial issue with a sense of urgency.

US Presidential Election

The US presidential election will have a major impact on global political and economic direction. For Japan, the election of a new political leader for our ally the US is of particular importance, and we will continue to closely monitor developments. I expect the people of the United States to exercise fair judgment and good sense. Whichever candidate is elected, it will be important for Japan and the US to maintain and strengthen their relationship in many spheres, including politics and economics.

Japan-Russia Economic Relations

Given that Japan and Russia have still not concluded a peace treaty more than 70 years after the end of the Second World War, Prime Minister Shinzo Abe has expressed a strong desire to reach such a settlement. This is a natural and laudable inclination for a national leader. Mr. Hiroshige Seko, Minister for Economic Cooperation with Russia, has responded to the Prime Minister's desire with vigorous efforts that have produced results, and I hope that a historic agreement will be reached at the Japan-Russia leaders' summit in December.

The business community will actively cooperate in implementing the eight-point plan for cooperation proposed by Japan at the last leaders' summit in Sochi, and our basic stance is to engage with the plan in a business-like, dispassionate, and constructive manner. Keidanren's Japan-Russia Business Cooperation Committee and Japan-Russia Business Council recently signed a memorandum of understanding on expanding cooperation. We will make positive efforts to further strengthen and promote bilateral economic exchange. Attractive and promising business opportunities exist in Russia, especially in the Far East region, and we will thoroughly analyze and address these opportunities.

Political Turmoil in the Republic of Korea

While I am hesitant to comment on domestic political issues in South Korea, I sincerely hope that the current turmoil does not impede the smooth functioning of politics and economics in the country. Korea currently faces a challenging security situation, and the economy is also beset by difficulties. Amid the accumulation of such issues, any interruption in government is undesirable. I hope that the situation is resolved as quickly as possible so that the government can once again fulfill its essential functions.

Executives' Comments