Japan's economy seems to have passed the worst phase of recession and has been stabilized by governmental measures adopted since last autumn; financial system stabilization measures and demand-boosting measures, including an emergency economic package and low-rate interest policy. The government must carry out the firm execution of its economic packages without any pause. And the business community, too, must do its part. Our task is to demonstrate private business vitality and reform the supply side of the economy. Only such efforts can bring about a full-scale recovery and make the nation's economy fit enough to enter the twenty-first century.
Reform of the supply-side structure and the enhancement of industrial competitiveness demand that businesses change themselves. We must live by the principles of "independence, self-help, and self-responsibility" and boldly change our own behavior, practices, and institutions. Japanese businesses also need to win greater public trust by practicing higher standards of business ethics and better corporate governance. The government should create a better environment for supply-side reforms to go forward by, for example, revising of corporate and taxation laws.
Japan's economy could be affected by the rapid demographic changes toward lower birthrates and aging of the population. Japan owes it to the world to carry out structural reforms to enhance its industrial competitiveness and revitalize its economy.
Financial institutions should take prompt action to dispose of bad loans, while developing a more efficient and customer-friendly financial market in this country. The foremost challenge to the nonfinancial sector is to resolve excess capacity and indebtedness and press ahead with reform of the supply-side structure.
The government should create an environment conducive to reform; it should revise corporate and taxation laws and take remedial steps concerning the high-cost structure. The government should also carry out further deregulation and improve the employment safety net. The private sector should take the initiative to rejuvenate existing industries, open up new areas of business and industry, and secure employment opportunities.
The government and industry should cooperate in developing a national strategy to encourage the growth of industries capable of leading the economy in the next century. Government-industry collaboration is also needed in devising measures for promoting technological development, such as personnel exchanges among industry, government, and academia and adopting a more positive intellectual property policy. Educational reform, with the emphasis on opportunities to encourage the growth of creative talent, is another area that requires collaboration.
Enhanced industrial competitiveness needs a stable exchange rate. Depending on the further improvement of the settlement system and of the financial and capital markets, the government and industry should cooperate to facilitate the wider international use of the Japanese yen.
With demographic changes rapidly in progress, people today feel very insecure about the future. Dispelling such public anxiety and maintaining a vibrant economy require government-private-sector cooperation to redesign existing social security systems so that they will be financially sustainable over the long-term. Among the social security systems in need of reform are the public pension scheme, health insurance, and nursing care for elderly people with disabilities. When such reform is taken up, the government will have to review the balance of benefits and payments, as well as the ratio of direct to indirect taxes as revenue sources, while restraining a further increase of the people's burden of tax and social security costs.
Also, efforts must continue toward achieving a small but efficient government. The project of relocating the national capital, which could provide an opportunity to spur administrative reform, should be put into effect at an early date. There is also a need to accelerate the reform of local governments and their finances.
As Japan evolves into a less regulated society, demands are expected to increase on the judicial system. So, reform of the judiciary system will have to be taken up to make possible a more speedy court process and accommodate an increasing number of people engaged in the legal profession.
The continued improvement of social infrastructure is necessary if people are to enjoy a better quality of life and a reasonable degree of security. In planning infrastructure development, Japan's central and local governments should give priority to such social projects as housing, information and communications, distribution, social welfare, and environmental well-being. In so doing, they should actively use the private finance initiative (PFI), which utilizes the private sector's managerial resources. Private enterprises can be more extensively brought into play through further deregulation in the area of housing and urban development and tax revisions to reactivate property transactions and encourage the more efficient use of land.
Japan's business community already has adopted the Keidanren Global Environment Charter (1991), the Keidanren Appeal on the Environment (1996), and the Voluntary Action Plan on the Environment based on that appeal. In line with this action plan, we will actively apply measures to cope with the global warming problem, as well as the issues of industrial waste and chemical materials management. Also, we will further improve our activities to preserve nature from the standpoint of protecting the ecological system.
Seeking to expand two-way trade and investment, Japan's business community will step up dialogues with the government and private industry leaders of other countries. At the same time, efforts will be made to have the voices of Japan's industry heard better in the next round of liberalization talks under the World Trade Organization and other multilateral and bilateral negotiations. It is especially important for Japanese businesses to help the revival of the crisis-hit Asian economies by maintaining investments in Asia, as well as by extending cooperation in the fields of personnel training and the development of so-called supporting industries.