Interim Report of The Committee on New Business of Keidanren
Recommendations for Creating New Businesses:
Building an Economy and Society that Nurtures the Entrepreneurial Spirit
Chapter I : Overview
- Why Is New Industry And Business Creation Necessary?
- Japan's socioeconomic system is facing a major turning point, after having
functioned effectively for over half a century since W.W. II ended. Unless the
private sector itself undertakes bold economic reforms now, the country will
have difficulty emerging from prolonged business stagnation and in sustaining
economic expansion in the future. Without this growth, Japan will neither be
able to fulfill its proper role in the global economy nor will it be able to fulfill its
obligation to improve the Japanese people's standard of living.
- Particularly at this time when leading industries have matured and fears of
industrial hollowing-out are being fanned by the yen's continuing rise, it is vital
that Japan stimulate the economy and create jobs. This can only be done
through the creation of new industries that join technological innovation with
social needs and with the emergence of new businesses to sustain these
industries. It goes without saying that existing firms as well are expected to
form the nucleus of new industries and businesses through re-engineering and
through "creative destruction (trying to reform the existing system that is
unadaptable to current business style)".
- Japan must look to the global economic experience of its allies. The
revitalization of the US economy was due in large part to the dynamic
technological advances achieved by existing firms. New industries were
created through the growth of venture businesses in an extremely competitive
environment, particularly in the high tech arena. At the same time, major
corporations were revitalizing themselves through re-engineering. The entire
economic revitalization effort was supported by the foundation laid by the
drastic government deregulation and tax reform initiatives of the 1980s.
Reforms have not only taken place in the US and Europe, but more recently
many Asian nations have swiftly enacted major reforms, including institutional
reforms, in efforts to adapt quickly to the realities of the borderless economy.
- Impediments To The Start-Up of New Industries: The Direction of Reform.
- How does the situation in Japan compare with these developments
overseas? Although there are currently efforts being made to start-up new
industries, it is impossible to say that such industries are achieving the dynamic
growth necessary to reinvigorate the economy.
As for existing firms, they are attempting under adverse economic conditions to
re-engineer their management, but have not yet delineated clear-cut action plans.
The situation is so dire that in the manufacturing industry, the rate of business
failures already exceeds that of business starts. If this situation is not checked,
the entire Japanese economy may not escape major reductions in scale.
- It cannot be denied that Japan's slow progress in establishing new industries
and businesses is that, because of the success in attaining spectacular growth
after the WW II, the national attitude that "stability is best" has become deeply-
rooted. At the same time, in society generally, there is a diminished sense of
eagerness to face new challenges, of readiness to grapple with any problem
without fear of failure, and of willingness to undertake innovative
At the same time the operation of the market mechanism, which should be free
and vital, is being hampered by excessive regulations pertaining to business
operations, raising capital, and the system that places importance on vested
rights and by the policy management system. It is clear that these practices are
obstructing new business creation and development of innovative businesses by
established firms. These institutional and commercial practice are killing the
entrepreneurial spirit that is a natural asset of any vital economy and creating an
atmosphere in which the starting-up of new industries is no longer valued by
- In order to rectify this situation, first and foremost Japanese employees and
the corporations themselves must initiate internal reforms and develop an
openness to new challenges while adhering to the principle of individual
responsibility. In addition, economic and social reforms must be enacted,
beginning with the deregulation and redesign of commercial practices. We
must create an economic environment in which it is possible for entrepreneurs to
carry-out various "experiments" in the market without being crushed by forces
that preserve the status quo and to have those "experiments" evaluated
In addition, we must build a system under which those entrepreneurs who
establish new businesses take responsibility for both the risks of failure and the
rewards of success, and those who share in the risk of investing also share in the
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