[ Nippon Keidanren ] [ Journal ]
Messages from "Economic Trend", June 2006

Realism, Optimism and Pragmatism

Chairman, Nippon Keidanren

Realism comes first when company managers take the first step to solve any problem. In other words, CEOs are not allowed to look away from what is going on before them.

One of stern realities is global competition. Nowadays rapid growth of the "BRICs" countries draws a great deal of attention all over the world. The trade surpluses of China and Russia are already larger than that of Japan. Japan's growth rate has been stuck at an average annual rate of somewhere above 1% since entering the 21st century. In contrast, China has enjoyed more than 9% growth, while Russia and India have maintained around 6% growth. All three countries are remarkably growing. There is a prediction that Japan will fall behind China in about 10 years and India in 2 decades in point of GDP.

It is a reality, but figures do not show us the way to go. Optimism is the key word. Optimistic thinking is needed to cut a path through hard global competition. The continued high pace growth of the "BRICs" countries with huge population means an expansion of the global market. Japanese exports to India, China and Russia have continued growing at annual rate of about 8%, more than 20% and more than 50% respectively for the last consecutive 5 years starting 2000. In the same period, Japan's trilateral trade in which goods have been exported to the US and Europe through production bases in Asian countries has also expanded and increased her commissions on intermediary by 7.5 times.

Pragmatism is also required to live in this world. Positive thinking and a firm growth strategy based on pragmatism can make the current situation, the rise of the "BRICs" a major business opportunity rather than a threat. What Japan should do now is, first to become the innovation center of the world and create a positive cycle of innovated value on the global market. To be more precise, Japanese manufacturing industries should continue to develop new products and technologies without a break. It will enable mother plants in Japan to become high value added product suppliers and overseas bases to play an important role as mass production centers of general purpose goods with a good supply of key components from Japan. This is the way to keep growing and survive mega competition.

It is also necessary for Japan to conclude Free Trade Agreements and Economic Partnership Agreements with target countries without delay. Further liberalization of domestic market as well as investment rule making on a global basis will be ensured in the process. Networking of FTAs and EPAs will help Japan to set down necessary conditions to carry on collaboration and division of labor with foreign countries.

In addition to intensifying global competition, Japan faces many other challenges such as social security system reform. The path to a solution is, however, sure to emerge when realistic observation, optimistic thinking and pragmatic methods to tackle the critical problems are properly adopted and implemented.

US President Ronald Reagan once said, "There are no great limits to growth because there are no limits of human intelligence, imagination and wonder." This is a sentiment shared by Nippon Keidanren, which will wrestle with the challenges facing Japan with an indomitable determination.

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