[ Nippon Keidanren ] [ Policy ]
Urgent Proposal for emerging from the Economic Crisis:
Calling for the Prompt Implementation of a Supplementary Budget for Fiscal 2009
March 9, 2009
Today Japan faces an economic crisis unlike anything it has experienced in the past. The impact of the world financial crisis has spread to the real economy and set off a global recession. Japan had enjoyed ongoing export-led growth and thus had been dealt a particularly severe blow. In the fourth quarter of calendar 2008, the Japanese economy contracted at an annualized rate of 12.7 percent from the previous period. With the United States shrinking at a rate of 6.2 percent and the euro zone at 5.7 percent, this means that Japan is the hardest hit of the world's three key economic centers. Moreover, Japan is projected to see double-digit negative growth in the first quarter of calendar 2009, as well.
With the current rapid decline in demand, industry continues to dramatically reduce production and the employment situation is deteriorating greatly. The Japanese people are growing anxious today as the future seems completely uncertain. The most serious issue that we face now is taking all means at our disposal to prevent the occurrence and expansion of a negative spiral of a deteriorating real economy and shrinking financial credit.
Under these circumstances, the Japanese government must step forward and launch radical countermeasures to eliminate this anxious mindset and prevent the economy from further deterioration. The implementation of economic stimulus measures is also part of international policy coordination efforts to resolve the world recession.
Last month, Nippon Keidanren called for the Japanese government to promote national projects as a Japanese New Deal to ensure employment security, create jobs, and enhance Japan's growth potential. Of the measures proposed for these projects, implementation of quick-impact policies to create demand and measures to enhance the employment safety net should be accelerated. It is also urgent that we facilitate corporate finance.
To achieve this, the government should pass the fiscal 2009 budget and its related bills as well as the tax reform bill by the end of fiscal 2008. Then it should promptly make up a supplementary budget for fiscal 2009 (including tax reform) and implement with a sense of urgency large-scale economic measures centered on those listed below. At present, the gap between supply and demand is in excess of 5 percent of GDP (about 25 trillion yen). Under these circumstances, the Japanese government should initiate fiscal expenditures that will steadily lead to the stabilization and creation of jobs and the enhancement of the nation's growth potential.
1. Implementation of Quick-Impact Policies to Create Demand
(1) Creating a Low-Carbon, Recycling-Oriented Society
- Develop support measures to promote the purchase of eco-friendly vehicles (electric vehicles, hybrid vehicles, etc.) and to encourage vehicle replacement (e.g., replacement of vehicles that are over 13 years old)
- Implement support measures to promote the development and spread of energy-saving home appliances, high-efficiency water heaters, household fuel cells, solar panels, etc.
- Devise support measures to encourage the construction of energy-saving and other kinds of high-performance housing and the rebuilding of housing
(2) Promoting and Accelerating the Development of Key Infrastructure
- Accelerate the construction and completion of loop roads in major metropolitan areas, promote industrial advancement in regional areas, and improve roads and enhance landscapes (elimination of utility poles, etc.) to bolster tourism
- Promote the further internationalization of Haneda Airport, further capacity expansion of Tokyo area airports, and the improvement of access between hub airports, including Narita Airport, and urban areas
- Strengthen wide-area alliances and develop facilities for foreign container ships at Keihin Port, Ise Bay, Hanshin Port, and others
- Accelerate the construction of new Shinkansen lines to foster the revitalization of Japan's regional areas
- Reinforce public facilities, including elementary and junior high schools, against earthquake and convert them into "green" facilities
- Repair and improve old roads and bridges
- Introduce measures to promote digital terrestrial-compatible equipments
- Develop broadband infrastructure for regional revitalization through ICT utilization
- Encourage the reinforcement of housing against earthquake and fire through redevelopment, rebuilding, and other means
- Develop daycare facilities for children and various kinds of at-home nursing care services and residential nursing care facilities for older persons
(3) Improving Tax Measures to Promote Use of Personal Financial Assets
- Substantially increase the basic deduction for gift tax (currently, 1.1 million yen) for a limited period
2. Enhancement of the Employment Safety Net and Facilitation of Labor Mobility
(1) Enhancing the Safety Net through Joint Effort by the Public and Private Sectors
- Further enhance the Employment Adjustment Subsidy Program
- Actively use funds set up under the Hometown Employment Revitalization Special Grant to support regional job creation; promote cooperation of companies and others in these funds
- Create a "Work Support Benefits System (provisional name)" to secure livelihood stability for people enrolled in job training who cannot receive unemployment insurance or other benefits (drawing on funds from the General Account)
(2) Facilitating Labor Mobility (including foreign nationals residing in Japan)
- Develop one-stop comprehensive employment-support centers that can handle job offers and job searches for a wide range of industries
- Expand public employment training programs
- Encourage the use of the Job Card system and introduce IC cards
(3) Promoting Fields with High Potential for Job Creation and Expansion
- Substantially increase human resources in nursing care and daycare services and improve their work conditions
- Revitalize (re-farm) abandoned cultivated land, develop new farmers, and encourage partnerships among agriculture, commerce, and industry
- Promote the digitalization of administrative documents and develop high-level ICT human resources
3. Facilitation of Corporate Finance
- Expand emergency investments and loans as well as credit guarantees through government-affiliated financial institutions (including the Development Bank of Japan)
- Increase purchases of commercial papers, corporate bonds, stocks, and asset-backed securities by the Bank of Japan and government-affiliated financial institutions
- Expand purchases of assets by the Banks' Shareholdings Purchase Corporation and others
- Implement measures to address stock market stagnation (e.g., issuance of TOPIX-linked ETF convertible bonds guaranteed by the government)
- Introduce measures to stabilize and adjust the foreign exchange market
- Reinstate the corporate tax refund system through loss carrybacks for major corporations
Maintaining the free trade system is of vital importance for the recovery and growth of the world economy. The conclusion of the WTO Doha Round, the building of an economic partnership network centered on East Asia, and support for infrastructure development should be hastened while resolutely eliminating measures that would lead to protectionism.
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