Reviving the Japanese Economy and Building a Dynamic Society in the Twenty-First Century
-- Proposal for the Economic Strategy Council --
October 12, 1998
(Japan Federation of Economic Organizations)
The Japanese economy has encountered an unprecedented crisis. The public has become disturbed about the stability of the financial system, which has been rocked by the failure of financial institutions, the security of employment in a context of rapidly rising jobless rates, and the security of life in the future, when taxes and social security contributions will move higher. Now is the time for unveiling a vision for structural reform, along with the means to realize it, to people at home and overseas, thereby eradicating worries about the years to come.
The business world must adopt a positive stance toward structural reform based on thorough implementation of free-market economic ideals and complete acceptance of the principle of self-responsibility. Grasping current conditions dispassionately, businesses must strive by themselves to restore the economy's vitality, as by making management more efficient and developing new goods and services capable of generating demand.
The new administration of Prime Minister Keizo Obuchi has made economic rejuvenation its top priority and organized the Economic Strategy Council to assist it. Keidanren is pinning its hopes on the ability of the council to elucidate a future vision. In the interest of reviving the economy and building an affluent and dynamic society, Keidanren would like to propose that the council give priority attention to concrete measures after having clarified the basic ideals of the economy and society Japan should aim to construct.
- Basic Ideals for Reviving and Energizing the Japanese Economy (A Blueprint for the Economy and Society)
The world has now entered an era of "megacompetition" because of the renewed vitality of the United States and Britain and the rapid industrialization of Japan's East Asian neighbors. With the expansion of sophisticated telecommunications networks, economies and societies are being globalized. Japan, meanwhile, is moving at an unprecedented pace down the road to a society with few children and many elderly, and it is about to witness a contraction of its population. In this context, the basic ideals for reviving and energizing Japan can be stated as follows:
- Improve international competitiveness by upgrading market-economy systems, creating an environment enabling firms and individuals to display their full abilities, and reforming systems to fit with international rules and practices.
- Install an industrial base for pioneering moves into the future.
- Restructure systems for flexible adaptation to changes in the social environment.
Such a shift in structure is needed to create an "attractive Japan," a country with a sense of its raison d'etre.
- Concrete Measures for the Basic Ideals
In line with these basic ideals, we propose the following concrete measures.
Construct an economy full of vitality within the market-economy system (strengthen international competitive power)
- Constructing infrastructure for businesses
- Promptly rebuild the financial system.
- Energize securities markets (revise taxes on securities trading and the rules on exchanging shares to resolve cross-shareholding arrangements).
- Revise outdated economic laws and regulations (including those pertaining to the staging of shareholders' meetings, suits lodged by representatives of shareholders, and ownership of stocks by the companies issuing them).
- Fundamentally reforming the public sector
- In a reform of central and local fiscal spending, accord priorities to public works and make them more efficient through promotion of the Private Finance Initiative and introduction of cost-benefit analyses.
- Radically revising the tax system
- Reform the systems for personal income taxes and corporate taxes; increase the ratio of indirect taxes; and lift the ratio of income detected and taxed.
Upgrade industrial infrastructure for blazing a path into the future
- Correcting the high-cost structure and revitalizing manufacturing
- Promote public-private self-help efforts; relax and remove regulations.
- Grappling with the promotion of technology
- Strengthen the technological base for existing industries; develop technologies for strategic fields including information, the environment, energy, and biotechnology.
Restructure systems for flexible responses to changes in the social environment
- Responding to the graying of the population
- Reform the public pension system (apply a formula of indirect taxation for the "basic" portion of pensions).
- Reform corporate pension systems (introduce defined-contribution pension systems and eliminate the special tax on corporate pension).
- Implement measures to encourage the rearing of more children (deregulate child-care centers and kindergartens; bolster measures for child-care leave and time off; introduce a reemployment system).
- Structurally reforming the labor market
- Make the labor market more efficient through means including deregulation; improve unemployment compensation and other systems.
- Upgrading the urban and residential environment
- Guide urban planning toward the creation of dynamic cities with workplaces close to residences.
- Reform residential taxes (increase income tax deductions for interest on home mortgages, expand tax incentives to procure housing, lessen the tax costs of selling or possessing homes, and facilitate changes of residence).
- Relax and rationalize controls on construction and urban planning.
- In Conclusion
With the lengthening of the economic slump and the spread of the people's feeling that they have been boxed in, we have stepped up our call for carrying out structural reform to clarify a vision for the future.
The Economic Strategy Council needs to eradicate the people's feelings of unease and uncertainty about the future by drafting a bold and viable strategic vision. As the members of the council prepare a report, they should clarify the process to be used for a long-term blueprint and provide a schedule for it. They must map out solid policy measures.
As for the government, it must do everything it can to provide political leadership, firmly push through structural reforms, and hold the accompanying pains to a minimum. The government must speedily resolve the problems before it, moving into action before the twenty-first century comes rolling in not long from now. Those of us in the business world will also do everything we can to overcome our country's unprecedented economic crisis.
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