Messages from Monthly Keidanren, April 1999

The Unaccomplished Task of the Current Generation
as We Move towards Twenty-first Century

Norio Ohga
Vice Chairman, Keidanren
Chairman and Representative Director, Chief Executive Officer,
Sony Corporation

The Japanese economy has been trapped in a downward spiral stemming from asset appraised deflation. The threat of deflation had never been experienced in Japan in the past half century of post World War II. Therefore, we were not fully aware how fearful deflation was and how hard recovery would be once deflation started. And, in 1997, when the economy needed to be "accelerated" to turn in a positive direction, the government "put on the brakes" through fiscal structural reform.

However, since last autumn, the Obuchi government has placed the highest priority on economic recovery, and the Keidanren as well as the government have made all efforts possible to tackle the problem to achieve the same goal. I believe we are now moving in the right direction.

The different areas and industries of economy are all interconnected and moving simultaneously like a wheel. Accordingly, if the wheel of the economy starts to move in a positive upward spiral, eventually it will lead to an increase in tax revenues. To turn the wheel, we have to start pushing from the area most easily to move. It is my belief that personal consumption and housing investment are the areas that can stimulate the economy.

Japanese housing is far below the standards of developed countries, and there is a strong demand. Last autumn, the government decided to implement a large tax incentive on home purchases. This incentive has a specified duration of two years, which I think will psychologically appeal to consumers, having positive effects on economy.

To begin with, it is one of the goals of the Japanese government to catch up with the global standard of housing. Housing policy used to place emphasis on quantity (the number of houses constructed), but it should be resolutely shifted to pursue quality. It is important to grasp the momentum created when the nation's attention is focused on housing, and to further implement an effective policy which enables the people in Japan to purchase larger and better quality homes. In this regard, I think the consumption tax (value added tax) on housing should be re-examined. Generally, in developed countries, value added tax is not imposed on real estate. In Japan, the purchaser is burdened with four kinds of tax: consumption tax, real estate acquisition tax, registration tax, and stamp tax.

It is a nation's mission to visualize what kind of lifestyle or the standards of living, the government should promote for the people, and, with this vision, the social systems should be reviewed and revised. I think the quality of housing, as well as that of streets and cities, is a reflection of the quality of civilization and culture of a nation, and when we look upon the current circumstances in Japan, there is still a great deal to be done by our generation.

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