Messages from Monthly Keidanren, December 2001

Challenges in Distribution Sector and Structural Reform

Katsuhiko Hirai
Chairmen of Committee on Distribution, Keidanren
President and CEO, Toray Industries, Inc.

Last May, I assumed the office of Chairman of the Committee on Distribution at Keidanren. Japan's distribution sector is undergoing drastic changes that could better be described as a "revolution". Domestic consumption has been sluggish in general owing to the nation's matured economic structure and prolonged recession. The impact of the September 11 attacks in the United States has worsened the situation as well.

Revitalizing private consumption is one of the most important issues now facing Japan. However, several sectors are doing well and enjoying growth. Some major foreign players in the retail and distribution sector are entering into the Japanese market aggressively, and entrepreneurs who are not bound by existing business custom have been establishing new business models. These new business models are based on global sourcing and merchandising systems, and more efficient logistics systems. Along with the progressing IT revolution, these new business models have had quite an impact on traditional distribution formats and business practices.

Needless to say, the structural adjustment of Japan's domestic industries is inevitable as international industrial competition continues to heat up. The revolution that is now taking place in the distribution sector proves that industrial structural reforms are actually under way. As a result, human, material, financial and informational resources are being used more efficiently than ever before. This revolution also appears to have the great potential to realize a new equilibrium in the reallocation of human resources, which is pivotal to supply-side renovation.

Naturally, each individual company must do its part in order for structural reform to succeed. However, I believe that one of the most important things that all of us working in the industrial sector can do is to fully examine all reform-related ideas at every level of industry. We must also share these ideas and make adjustments in order to realize a more effective industrial structure.

Also, it is equally important and advisable to work steadily toward a new equilibrium in order to ensure nationwide "public stability", which is a major objective of the national policies. I hope to further direct the activities of the Committee on Distribution with these viewpoints in mind, and would appreciate the strong support and understanding from all the members of Keidanren.

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