- Revisions to the Charter of Corporate Behavior
- The Exchange Rate
- Politics and Money
- Remarks by US President Biden
Revisions to the Charter of Corporate Behavior
Developing relationships of mutual prosperity across entire supply chains will be essential to the goals of shaking off deflationary pressures through constructive wage increases and the realization of sustainable capitalism. Given this awareness, Keidanren has called on its member-companies to endorse the Declaration of Partnership Building initiative.
As an outcome of its efforts, a growing number of its member-companies have decided to participate in the initiative, including about 86 percent of those capitalized at 10 billion yen or more. However, as of April 12, only 56.7 percent (883) of its corporate members had thus far decided to back the initiative. Therefore, to further promote fairness in business transactions as a social norm, Keidanren has decided to revise its Charter of Corporate Behavior. Last revised in 2017, the Charter lays out the principles of conduct that all Keidanren-affiliated companies and organizations are expected to uphold. At its upcoming regular general meeting on May 31, Keidanren plans to revise Principle 2 in the Charter as well as selected sections in the Charter's reference document, Implementation Guidance. Specifically, we intend to have Principle 2 explicitly mandate, as a code of conduct, that companies support mutual prosperity across their supply chains as a whole, in compliance with the Declaration of Partnership Building initiative.
Keidanren will strive to fully familiarize its member-companies with these revisions and continue encouraging all to put the spirit of the Charter into practice.
(In response to a question regarding the reasons for remarks in the Charter's Implementation Guidance about passing labor costs on through product prices) The reason is that we want to encourage appropriate pass-through, including that of labor costs, and accordingly spur momentum toward increasing wages, even among SMEs, promote a virtuous cycle between wages and prices, and ultimately free the economy entirely from deflationary pressures. Although progress has been made on the pass-through of increases in raw material costs and energy prices, many companies are still in denial about passing on labor costs. We want to free companies from their deflation-entrenched habits and mindsets and help normalize the practice of cost pass-through.
(In response to a question about Keidanren's handling of violations of its Charter of Corporate Behavior by member-companies) We take every opportunity to encourage our members to comply with the Charter. However, in the event of conduct that is contrary to the spirit of the Charter or its principles, we call on the offending party to voluntarily submit reports and implement appropriate countermeasures. Any actions taken by Keidanren against offenders are decided on a case-by-case basis.
The Exchange Rate
(In response to a question about the impact of the yen's current softening trend on the Japanese economy, and indications that the government or Bank of Japan have intervened in the currency market) In one respect, companies in the manufacturing and tourist industries are likely to reap benefits from the weak yen in the short term. However, there are concerns about a potential side-effect, namely, that the trend in cost-push inflation might drag on. The exchange rate is one indicator of a nation's economic strength. However, if we accept the notion that it reflects that nation's economic fundamentals, then the current rate of over 150 yen to the US dollar suggests the depreciation trend has gone too far. Ideally, steps to strengthen the Japanese economy should result in a more accurate appraisal of the yen's value.
I am aware of speculation that the Japanese government or BoJ may have intervened in the forex market on two occasions, but I have no way of knowing whether that is true or not. Hypothetically, assuming they did in fact intervene, I would venture that the timing for effective action of that kind was appropriate. However, as the government has had no comment on this matter, I will refrain from further comment myself.
(In response to a question about the need for future interventions aimed at curbing the soft trend in the yen) As long as the gap between US and Japanese interest rates persists, it will probably be difficult to avert an impact from speculative moves in the yen-dollar market, at least in the short term. It is conceivable the authorities will intervene in the forex market to stem any excessive movements in the yen.
Politics and Money
(In response to a question about the Liberal Democratic Party's defeat in the by-elections for three Lower House seats) As Prime Minister Kishida himself noted, questions about political funding were a background factor, and the election results should be taken seriously. I believe the election outcome attests to the public's concern with the posture and specific actions demonstrated by the LDP in dealing with this matter.
(In response to a question about the factors the Japanese public deems important when it comes to politics and money) Ensuring transparency and effectiveness is what matters, and the public arguably yearns for a serious discussion of these issues within the political sphere. I want the ruling and opposition parties to continue their deliberations on these questions.
(In response to a question seeking the Chairman's position on demands from multiple political parties to ban political contributions from corporations and private organizations) Regardless of the country, sustaining a political democracy comes with considerable costs. I want the Diet to pursue a full discussion of the fundamental issues surrounding this cost burden and the mechanisms that should be employed to offset it.
Remarks by US President Biden
(In response to a question seeking the Chairman's assessment of President Biden's description of Japan as "xenophobic") Unfortunately, that comment is not rooted in an accurate understanding of Japan's policies. Japan is not xenophobic at all. Japan welcomes large inflows of foreign tourists, and close to 3 million foreign nationals currently live in harmony with their Japanese neighbors in communities throughout Japan.
Japan faces a declining birthrate coupled with demographic aging, and that trend is intensifying. Over the medium and longer term, it is expected to experience a continued decline in its working-age population. Against that backdrop, Japan will need to act strategically to attract more human talent from abroad with a certain measure of professional knowledge and skills. The new Committee on Policy on Foreign Nationals (provisional name), to be created by Keidanren, will be engaged in a wide-ranging investigation of related issues, including the development of an environment for expanded immigration.