Create a Society with Vigorous Economic Strength

Koizumi administration is leading Japan to a path of "structural reform without sacred areas." Beset by deflation and rising unemployment, the country is facing a growing pain. Attempt to postpone reform for fear of pain will, however, invite prolonged economic gloom, and fritter away an opportunity to create an economic society that is vigorous and truly led by the private sector.

There is a need to strengthen the economic fundamentals of Japan to flexibly respond to globalization, the aging of society, declining birth rates, and other major circumstantial changes both at home and abroad. Japan must pursue structural reforms without turning back. Renaissance of the Japanese economy is also a requisite for healthy development of the world economy. As a member of international community, it is incumbent upon our nation to move forward.

Companies have responsibilities to show initiatives to improve international competitiveness by promptly disposing non-performing loans and excessive corporate debt and by engaging in corporate restructuring. At the same time, industry must develop new businesses and take a proactive approach to technological development.

The government must remove itself from involvement in economic activity. In line with the principle of shifting responsibility from government to the private sector, the emphasis must be on national and regional administrative and fiscal reform. In particular, the government must take a holistic approach to fiscal structural reforms, including government spending structure, social security system, and taxation system. It must engage in sweeping regulatory reform and the reform of special public corporations; but at the same time it is essential that government establish market-based legislative and other systems that will provide ex post facto regulation.

If economic resources that languish in areas of low productivity are re-distributed through reforms to areas of higher productivity - and if uncertainties of the Japanese people about the future can be assuaged - then levels of growth appropriate to the high inherent potential of the Japanese economy would be achieved.

2002 will be an important year, one that is crucial to structural reform in every sense. Keidanren will form a new entity with Nikkeiren, with the objective of becoming a comprehensive economic body that has the ability to propose and achieve powerful policy measures. Keidanren aims at creating an attractive business environment in which all individuals and companies with passion and ability, giving full vent to their creativity and inventiveness, would attain their ultimate goal.

Major Policy Agenda in 2002

Creating a small and efficient government

1. Promoting administrative and fiscal reform

   1. Establish a grand design for comprehensive fiscal structural reform at the national and local government levels, incorporating aspects such as structure of government spending, social security system, and taxation system.
   2. Advance administrative reform at both the national and local government by achieving clear separation in the roles of government and the private sector, and amalgamating municipalities.
   3. Implement regulatory reform with the objective of re-invigorating the economy and improving public amenities.

2. Creating a sustainable social security system

   1. Configure a sustainable medical insurance system (review the medical system for the elderly and strengthen insurers' power).
   2. Re-configure the public pension system.
   3. Bring greater freedom and more choice in corporate pension systems (abolish special corporate tax; achieve early refund of substitute portion of employee pension funds to the government-operated pension funds).

3. Fundamental taxation system reform

   1. Introduce consolidated tax return system.
   2. Reform further corporate and personal income tax.
   3. Engage in fundamental reform of local taxation, including a review of national and local share of taxable resources.
   4. Increase consumption tax to support the configuration of a sustainable social security system.

Establish a new foundation for growth

1. Revitalize financial and capital markets and enhance the financial systems

   1. Ensure prompt and appropriate disposal of non-performing loans, including the possible injection of public capital.
   2. Establish a Japanese SEC to comprehensively supervise securities trading.
   3. Thoroughly reform taxation on financial trade with a view to encouraging investment.
   4. Improve security transaction systems, including shortening the period for settlement.

2. Establish an environment conducive to the ongoing IT revolution

   1. Enhance competition in the field of information and telecommunications.
   2. Respond to the trend in integration of telecommunications and broadcasting.
   3. Create a "single" electronic government incorporating both national and local players.
   4. Create an environment that supports broadband related business.
   5. Strengthen the fostering of IT related human resources.

3. Establish a strategic and efficient social infrastructure

   1. Place priority on infrastructure for transport and distribution (loop roads in metropolitan areas, core airports, etc.).
   2. Create urban infrastructure with emphasis on lifestyle and residential spaces, business and commercial spaces, and disaster response centers.
   3. Make good use of PFI.

4. Comprehensively and systematically promote policies to enhance science and technology and industrial technology

   1. Promote strategic and comprehensive policy on science and technology through the Council of Science and Technology Policy (primarily in leading-edge fields such as life sciences, information and telecommunications, the environment, nano-technology and new materials, and IT-astronomical infrastructure, etc.).
   2. Build strong linkages between industry, academia, and government.
   3. Develop strategic policy on intellectual property rights.

5. Create an environment conducive to new industry and new business

   1. Enhance incubation capabilities.
   2. Foster entrepreneurs and support personnel for venture businesses.
   3. Implement more comprehensive taxation support for venture businesses.

6. Promote unimpeded movement of labor and greater opportunities for job creation

   1. Provide a safety net of cooperation and linkages between government and the private sector.
   2. Find early employment for job seekers and restore sound fiscal policy relating to employment insurance.
   3. Enhance employment opportunities through regulatory reform and revitalization of existing industries.

7. Further legislative reform

   1. Achieve major reform of the Commercial Code to improve international competitiveness.
   2. Implement steady reform of the judiciary system, which will serve as infrastructure for a society of self-responsibility.

8. Promote educational reform

   1. Develop a compound, multi-track educational system for training creative, internationally minded personnel (introduce competitive principles and promote university reform and information technology in education).
   2. Develop education and a society that nurtures a high level of morality and social conscience.

Respond to globalization

1. Respond to global environmental issues and promote a cyclical society

   1. Be proactive in the pursuit of policies against global warming in harmony with economic activity.
   2. Take a holistic approach to putting in place both software (e.g. deregulation) and hardware (e.g. recycling facilities, waste disposal sites) elements necessary to achieving effective utilization of resources.
   3. Implement soil conservation policies appropriate to risk.

2. Establish an environment appropriate for expanding and deepening international business

   1. Specifically delineate and implement a grand design for trade and industry policy.
   2. Make a greater commitment to the new round of WTO talks.
   3. Push ahead the Free Trade Agreement (in Mexico, Korea, etc.).
   4. Intensify economic relations between the United States and Japan.
   5. Achieve stronger economic links with Asia.
   6. Strengthen linkages between government and the private sector to enhance the effective implementation of ODA programs in developing nations.