[ Nippon Keidanren ] [ Policy ]

Promoting Reforms to Realize a Private-Sector-Driven Economy and Society

Fiscal 2003 General Assembly Resolutions

May 27, 2003

Nippon Keidanren
(Japan Business Federation)

Japan's economic plight is extremely serious. The country has been too slow to adapt to changes in conditions at home and abroad, including a falling birthrate and an aging population, globalization, and advances in information technology. The resulting problems, combined with the aftereffects of the collapse of the economic bubble, have caused a prolonged economic stagnation that continues to stifle the initiative of the Japanese people. The root cause of this situation is a tendency on the part of government and some companies to postpone necessary reforms out of fear of change and pain.

To overcome this crisis, the government and the private sector must combine their respective strengths in a drive to improve Japan's international competitiveness through structural reforms and efforts to end asset deflation. They must also establish a new Japanese socioeconomic model to meet the needs of a new era.

Nippon Keidanren will commit all its energies to the following priority tasks aimed at realizing an economy and society conducive to private-sector-driven growth mechanisms that enable individuals and enterprises to take the initiative, as described in its new vision, "Japan 2025: Envisioning a Vibrant, Attractive Nation in the Twenty-First Century."

1. Urgent Integrated Reform of the Industrial and Financial Sectors

The most urgent priorities at present are the integrated revival of the industrial and financial sectors and the overcoming of asset deflation. Businesses must strengthen their management foundations and accelerate the disposal of non-performing loans and excess debts while reallocating management resources on a prioritized basis to high-profit areas. Government must work with the Bank of Japan, boldly using every policy tool available, without being bound by the frameworks of the past. Particular priorities include the reduction of the corporate tax burden, a radical review of land and housing taxation, the promotion of urban rejuvenation, and the revitalization of the stock market through decisive changes to securities taxation and the establishment of independent surveillance structures. Immediate action is needed in all of these areas.

Urgent action is also needed to prevent employment uncertainty from becoming more acute. In addition to creating new jobs, the government must rebuild the country's safety-net systems by enlisting the private sector in improving job training, skills development, and employment placement services.

Labor and management must work together more closely to maintain and stabilize employment and to improve productivity.

2. Comprehensive, Radical Reform of Social Security, Public Finance, and Taxation

Inadequate awareness of the present crisis has caused the government to settle for stopgap measures instead of sweeping reforms in the area of fiscal policy and social security. This situation is eroding public confidence in government and heightening uncertainty about the future.

The government should, without delay, produce a comprehensive reform plan aimed at designing new social security, public finance, and taxation that provide long-term sustainability without sapping economic vitality. In particular, it must produce a concrete future vision for balancing benefits and costs across the entire spectrum of social and labor insurance, including pensions, health care, nursing care, and employment insurance. In tackling this task, the government should be guided by the goal of making substantial reductions in public expenditure and should not be afraid to make use of the consumption tax.

3. Strengthening Japan's Competitive Base as a Nation

Businesses will seek to generate new demand and jobs by creating internationally competitive products and services with high added value. The key to this process is intellectual property, especially the development and commercialization of innovative technology.

The government should support these initiatives by helping to make Japan a nation of creativity in science and technology. This will require improvement of intellectual property policies and promotion of university reform, human resource development, and industry-academia-government collaboration.

Another essential priority is reinforcement of regulatory reform-promotion structures, including the establishment of a basic regulatory reform law and the creation of a powerful organization, under private-sector leadership, as a successor to the Council for Regulatory Reform. Initiatives in this area should be accompanied by a revision of the role of government administration, including a shift from prior regulation to after-the-fact checking and the establishment of consumer administration policies based on the principle of self-responsibility.

There is an urgent need for initiatives to correct Japan's high-cost structure through the strategic and efficient development of social capital, including transportation and distribution systems and urban infrastructure in major cities.

4. Making Japan an Eco-Nation with Strong Environmental and Energy Strategies

As part of a strategy to make Japan an eco-nation, businesses should work to develop new environmental technology, determinedly implement the Nippon Keidanren Voluntary Action Plan on the Environment, and help to build a recycling society. The government should support these efforts and show strong leadership toward the establishment of an effective international global-warming prevention framework that includes the United States and developing countries.

Japan must establish a comprehensive energy strategy encompassing the diversification of energy sources, support for innovative technology, and the active use of nuclear power, including the nuclear fuel cycle.

5. Building a Society Where Diverse Individuals Can Use their Abilities

The development and utilization of diverse human resources are vital to economic and social revitalization. Businesses should strive to employ and promote a wide range of people and develop and improve their abilities, as well as working toward equal participation by men and women. Businesses must also help to develop a new generation of skilled people capable of contributing in various fields.

The government should increase its commitment to educational reform, including revising the Fundamental Law of Education, based on the recognition that education is the key to every challenge. It should also make radical changes to related laws to create a climate that enables diverse working styles suited to people's abilities and individual characteristics. Urgent steps must also be taken to put in place systems that allow the positive acceptance of foreign nationals.

6. Promoting Regional Initiative and Revitalization

Regions must be able to develop in ways that reflect their diversity. To this end, businesses should strive to maintain and expand employment in provincial areas by promoting new regionally focused ventures based on industry-academia-government cooperation and optimal use of Special Zones for Structural Reform. Nippon Keidanren will support regional initiatives in cooperation with regional employers' associations and economic federations.

The central government should consider ways to reduce its intervention in regional government, including the possible introduction of a federal system. Guided by the twin goals of devolving authority and reducing National Treasury charges, the priority in the short term must be to promote regional administrative and fiscal independence by pursuing a comprehensive review of the Local Allocation Tax system and the distribution of tax sources.

7. Improvement of External Economic Policies

The government should support free trade and investment activities through strategic trade policy initiatives, including the promotion of WTO negotiations, the formation of an East Asia free trade area, and the conclusion of bilateral free trade agreements. Efforts should also be made to create an environment conducive to direct foreign investment in Japan.

Nippon Keidanren will work to strengthen cooperative relationships with the WTO, ILO, OECD, World Bank, International Accounting Standards Board, and other organizations and to ensure that the views of industry are reflected in various international rules. The organization will actively engage in business diplomacy and foster international exchange with industrial sectors in other countries. It will also play an important role in initiatives in developing countries, including human-resource development and environmental measures.

8. Businesses Capable of Gaining Public Sympathy and Confidence

Businesses must recognize their social responsibilities through increased efforts to improve management transparency and apply business ethics. They should also expand their social action programs, including support for nonprofit organizations.

Nippon Keidanren will continue to urge businesses to observe the Charter of Corporate Behavior. It will carry out further studies concerning the internal control systems needed to support improvements in the effectiveness of corporate governance.

To achieve these goals, businesspeople must build a new relationship with the political system, both by cooperating and by taking a more assertive stance where necessary. As part of this initiative, Nippon Keidanren urges every political party to present a clear vision for Japan's economic and social future, to propose policies for the realization of that vision, and to implement those policies. Based on the progress the parties make, Nippon Keidanren will produce guidelines to assist businesses and organizations in making decisions about their financial support. The organization is confident that independent intervention by businesspeople can motivate the political system toward the realization of its economic and social vision.

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