Overcoming the Pains of Reform to Create a Vital Economy and Society

Takashi Imai Chairman, Keidanren

Last year the world economy showed a sudden slowdown. There are various reasons, although China maintaining steady economic growth was one of the exceptions. The year started with recession in the field of information technology (IT) industry, and the last major straw was the terrorists' attacks in the United States on September 11.
The Japanese economy, for its part, is suffering unprecedented problems. Negative nominal growth for the third year running was marked without a sign of curb on deflation.
With traditional economic-stimulus measures losing their effectiveness, the policy of "no recovery without structural reforms" shown aloft by the cabinet of Prime Minister Junichiro Koizumi has enjoyed strong public support since the inception of his administration last year. We are now standing in the middle of a critical juncture of sink or swim of Japanese economy. In order to create an economy and society brimming with vitality, we must overcome pains inevitably appeared in the process of structural reforms.

Under these circumstances, Japanese corporations are required strongly and imperatively to contribute to revitalization of Japan's industrial strength without any further delay. What is needed to achieve this goal, financial institutions should accelerate clearing up of non-performing loans. In accordance with the "Guideline for Multi-Creditor Out-of-Court Workouts" of the Japanese Bankers Association, as well as by the decision to expand function of the Resolution and Collection Corp should also be utilized effectively. On the other hand, the businesses should energetically proceed with the restructuring.
At the same time, we must apply maximum ingenuity and effort in the interests of establishing a new foundation for potential growth. We must boldly address ourselves to the task of developing new industries and pioneering new businesses by making effective use of the results of technology development and regulatory reform. We must also promote innovative creation by coordinating industrial, academic, and government resources. Meanwhile, Japan must not waste time in implementing measures against global-warming in a manner reconciled with economic activities as well as in consolidating policies designed to create a "recycling-oriented society."

The government is required to significantly decrease state intervention in economic activities in accordance with the general principles of "let private sector handle what they can." Drastic reform of the regulatory scheme, as well as of the public corporations, is mandatory. Another major task of the government is to erase people's anxiety about their future through structural reform of the public finance system. Public expenditures, social security and taxation structure should be reconsidered comprehensively.

In May, Keidanren will form a new entity called Japan Business Federation with Nikkeiren. We shall become a comprehensive general economic organization playing a greater role in the process of policy-making and its implementation. We shall make the year, 2002, the first stage of fulfillment of structural reform of Japan. For that crucial task, allow me to ask all for the wholehearted support towards the new organization.