- Transfer of Defense Equipment and Technology
- Middle East Situation
- Monetary Policy Meeting
- A Robust Middle Class
- Expansion of the Discretionary Labor System
- Designation of "Kokushobi" (Severe Heat Days)
Transfer of Defense Equipment and Technology
(In response to a question about the reaction to reports that the government is expected, as early as this week, to approve draft revisions to the Implementation Guidelines for the Three Principles on Transfer of Defense Equipment and Technology at a Cabinet meeting) Amid an increasingly severe security environment, strengthening cooperation with allies and like-minded countries and contributing to regional peace and stability are important objectives. We recognize appropriate transfers of defense equipment and technology as one effective means to those ends.
The specific content of the proposed revisions has not yet been made public, and we will examine it carefully once it is available. That said, we understand that the primary objective is not simply to expand exports, but rather to strengthen cooperation with allies and like-minded countries. We also recognize that this will ultimately help maintain and strengthen Japan's defense production and technology base. To make the rules effective, even closer public-private cooperation under government leadership will be required. We would like the government to provide thorough explanations both domestically and internationally, ensure appropriate control of equipment transfers, formulate a strategy that balances domestic procurement and overseas expansion, and support the maintenance and strengthening of Japan's domestic production and technology base.
(In response to a further question about expectations for related industries following revision of the implementation guidelines) At present, we understand that overseas transfers of defense equipment remain limited. Looking ahead, if Japan is to maintain and strengthen its domestic defense production and technology base, it will be essential to strike an appropriate balance between domestic procurement and overseas expansion. Based on that premise, as we promote dual-use (civilian and military) applications, we would like to assess the potential for expanding private-sector production.(In response to a question about whether the revision of the Implementation Guidelines will require a review of the existing domestic procurement framework) As the security environment becomes more severe, the first priority is for the public and private sectors to engage in thorough discussions on how to secure Japan's defense posture. In this context, we understand that there will be cases in which domestic investment is needed to maintain and strengthen the supply capacity of related industries. Joint development of defense equipment with other countries is already beginning to take concrete shape. From the standpoint of cooperation not only within Japan but also with allies and like-minded countries, maintaining and strengthening defense equipment supply capacity will, in turn, lead to equipment transfers. Although this is currently an area that is unlikely to generate large-scale business, we see the planned revision of the Implementation Gwaruidelines as an opportunity to help establish the foundations for regional security.
Middle East Situation
(In response to a question about views on recent developments concerning renewed U.S.-Iran talks aimed at ending the military conflict) The situation remains highly uncertain, and we are deeply concerned that the outlook is impossible to predict. We sincerely hope that renewed talks between the United States and Iran will indeed take place. Once they do, we strongly expect to see progress toward an early de-escalation of the situation, including ensuring safe navigation through the Strait of Hormuz.
(In response to a question about the current state of bottlenecks in the distribution of oil and petroleum-related products amid heightened tensions in the Middle East) With regard to oil and petroleum-related products, we understand that the release of reserves, the use of inventories held by individual companies, and concerted public-private efforts to secure alternative sources have so far ensured that there are no impediments to maintaining domestic supply volumes.
Petroleum-related products are used throughout society, and their supply chains are broad, with some consisting of multiple layers. Under these circumstances, we understand that the relevant cabinet ministers and the government as a whole are working diligently to resolve delays that have emerged in parts of distribution networks. Member companies have expressed concern about the impact if the situation is prolonged, and many have already begun revising prices. There is significant concern that these price revisions could spread through the economy as a whole, driving up prices and weighing on business sentiment. The government will need to undertake a comprehensive review of both supply and demand in preparation for a prolonged situation.
(In response to a further question about the anticipated time required for the situation to normalize if the Strait of Hormuz blockade is lifted) Given the damage to oil-related facilities, including in countries around the Strait of Hormuz, even if the blockade were lifted, it is not possible to predict whether restoration and recovery would take several months or one to two years. A range of policy measures will need to be considered on the assumption that these conditions will persist for some time.
(In response to a question about the future direction of Japan's energy policy in light of the heightened tensions in the Middle East) The best path toward normalization would be the early conclusion of negotiations between the United States and Iran. Thanks to the determined efforts of both the public and private sectors, Japan has so far reached a point where there are no immediate impediments to securing domestic supply volumes of crude oil and other resources. At the same time, Japan inherently faces the risk of heavy reliance on imports of fossil fuels from overseas, particularly from the Middle East. This also makes Japan especially vulnerable to impacts in financial markets. Based on this experience, and on the premise that fossil fuels will still be needed during the transition toward carbon neutrality, it is important to reliably reduce risk by diversifying procurement sources while pursuing the optimal energy mix from a long-term perspective. In doing so, we believe that a major priority going forward should be to steadily realize the transition to an investment-driven economy while keeping in mind the promotion of green transformation (GX) and resource circulation through the realization of a circular economy.
Monetary Policy Meeting
(In response to a question about the outlook for the Bank of Japan's Monetary Policy Meeting scheduled for April 27 and 28 of the following week) The Bank of Japan will make an appropriate judgment on whether and when to raise interest rates. With uncertainty over the outlook for the Middle East situation unresolved, it is extremely difficult at this point to project the magnitude or breadth of its impact on the economy and prices, not only in the short term but also over the medium to long term. Although highly uncertain factors will remain significant for the time being, we believe the Bank of Japan will make an appropriate decision after gathering as much information as possible and conducting thorough data analysis.
At the G7 Finance Ministers and Central Bank Governors Meeting held on the 16th of last week, we understand that many participants expressed the view that monetary policy should remain in wait-and-see mode for now. We take this as reflecting uncertainty over the outlook for the Middle East situation and high volatility in financial markets. In any event, we will watch closely to see what decision the Bank of Japan reaches.
(In response to a question about whether, if the Bank of Japan forgoes a rate hike at the next Monetary Policy Meeting, this would amount to a delayed policy response, or falling "behind the curve," given the current economic situation) It is difficult to give a definitive answer, but ultimately this is a question of how each policy decision is evaluated after the fact. The Japanese economy currently faces the risk of falling into stagflation, in which rising prices coexist with economic stagnation. When assessing whether policy responses were timely, one key point will be whether the risk of stagflation was properly recognized when looking back on the present from various points in the future. Although the situation is difficult, we believe the Bank of Japan will make appropriate decisions going forward with these considerations in mind.
A Robust Middle Class
(In response to a question about views on the principal factors behind the shrinking of the middle class that has long supported the Japanese economy) In the aftermath of the collapse of the bubble economy and the ensuing financial crisis, companies facing difficult business conditions became strongly inclined toward cost-cutting. In terms of employment, while companies prioritized maintaining jobs, management did not pay sufficient attention to wage increases. In terms of production and investment, amid globalization, companies sought sources of profit overseas rather than domestically. These actions by individual companies may have led to a contractionary equilibrium across the Japanese economy as a whole. As a result, the middle class has continued to shrink, particularly among lower-income groups, and the business community needs to fully recognize this.
From this perspective, Keidanren has emphasized the need for companies themselves to change their mindset, proactively and boldly expand domestic capital investment, R&D investment, and investment in people, including wage increases, and advance the transition to an investment-driven economy. We believe that, starting from this, steadily driving the virtuous cycle of growth and distribution from a holistic perspective will also lead to the formation of a robust middle class.
(In response to a further question about whether legislation on equal pay for equal work should be reviewed to address disparities between regular employees and fixed-term and other non-regular workers, and about views on raising the labor share) Overall, many companies have taken steps in accordance with the legislation on equal pay for equal work. In addition, as regional minimum wages continue to rise substantially, companies have been raising wages and promoting conversion to regular employee status. We recognize that some progress has been made in raising wages and improving working conditions for fixed-term and other non-regular workers. Going forward, Keidanren will continue to call for further wage increases and improved working conditions for such workers through wage-setting based on appropriate evaluation of work, support for skills development and career advancement equivalent to that provided to regular employees, and proactive conversion to regular employee status.
One major factor behind the increase in fixed-term and other non-regular workers has been the expansion of labor force participation by people who have chosen so-called non-regular forms of employment. According to a survey by the Ministry of Internal Affairs and Communications, the most commonly cited reason for this choice was the desire to work at times convenient for the worker, accounting for more than one-third of all responses. While this is a labor-supply factor, there has also been stronger demand for fixed-term and other non-regular workers on the corporate side from the perspective of cost efficiency. Keidanren believes that realizing wage increases for fixed-term and other non-regular workers, who account for roughly 40 percent of all employees, is essential to further entrenching the strong momentum for wage increases, and that this will in turn contribute to raising the labor share.
Expansion of the Discretionary Labor System
(In response to a question about the reaction to the news that an advisory council at the Ministry of Health, Labor and Welfare would consider conducting a fact-finding survey of workers covered by the discretionary labor system) As discussions on expanding the discretionary labor system gain momentum in various deliberative bodies, we agree that data reflecting current conditions is needed and that a fact-finding survey should be conducted.
(In response to a further question about how explicitly the growth strategy to be compiled this summer should address the expansion of the scope of the discretionary labor system) One category of work to which we would like to see the discretionary labor system expanded is "solution-oriented proposal work," namely the development and proposal of products and services tailored to specific customers. This would include, for example, work that involves researching and analyzing a customer's challenges, planning and developing products and services such as systems that provide solutions, and proposing them to the customer. We would also like to see the system expanded to work that includes some duties not currently covered by the system. In addition, we are calling for expansion to HR shared services. These are types of work well suited to the discretionary labor system, and there is strong demand for them among member companies. We are not simply seeking to expand the system to sales work.
In light of Japan's severe labor supply constraints and its low labor productivity by international standards, introducing more flexible and autonomous work styles that enable a diverse range of workers to thrive is an extremely important issue. From this perspective, we will work to ensure that the results of the upcoming fact-finding survey, as well as specific approaches to expanding the system in line with the needs of member companies, are reflected in the growth strategy to be compiled this summer.
Designation of "Kokushobi" (Severe Heat Days)
(In response to a question asking for his reaction to the Japan Meteorological Agency's decision to name days with maximum temperatures of 40 degrees Celsius or higher "kokushobi" (severe heat days), and about expected countermeasures for such days) Against the backdrop of climate change, companies must anticipate as a risk the possibility that days with maximum temperatures exceeding 40 degrees Celsius will occur consecutively. Based on the recognition that human life is paramount, and with a view to protecting workers' health and supporting their families, companies need to incorporate heat countermeasures into their management not only within the framework of occupational safety and health, but also from the broader perspective of health and productivity management. We see this as an issue related to sustainability as well.