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Messages from Keidanren Executives August, 2022 Japan must strengthen its resilience

Kuniharu NAKAMURA Vice Chair, Keidanren
Chairman of the Board of Directors, SUMITOMO CORPORATION

Businesses can engage in global business activities only when there is a rules-based free and open international order, which is underpinned by universal values that the world has respected since the end of World War II. Challenged by the recent defiance of such values, the international community must unite more closely to safeguard them. Unfortunately, in today's world, the international community is not a perfectly united entity, but rather a divided one. In the face of this reality, it is necessary for us to make efforts to build stronger ties with like-minded countries, including G7 countries, with which we share common norms and values, while further increasing the number of such countries.

At the same time, as a country situated right in the middle of high security tensions in East Asia, it is critical for Japan to strengthen its resilience. It goes without saying that we must protect our own country, but it is also vital for us to keep the country's economy strong in ways that can withstand emergency situations. For that, Japan must promptly take measures to improve energy and food security. At the same time, Japan must immediately tackle other urgent issues including overcoming its vulnerability to disasters and dealing with the ongoing population decline, an issue that will directly affect the country's national strength in 20 or 30 years. The population of Japan has been decreasing continuously since reaching its peak at 128 million in 2008. If the current birth rate trend continues, the population will halve in 100 years. Once the country reaches that stage, it will be too late to change course. Thus, Japan needs to come up with measures to sustain the growth of its economy even with a shrinking population while tackling with a difficult task to slow down the speed of population decline.

Any decline in GDP brought about by the country's shrinking population can only be compensated for by improving productivity. To do this, each business must reconsider the ways of doing things at their worksites and replace the jobs that have long relied on the knowledge and intuition of experienced workers with digital solutions. By promoting the digital transformation of all the businesses across Japan, especially those that have not had a chance to take a step toward digitalization, we can improve our country's overall productivity.

Another thing we must focus on is to strengthen the country's innovation capability. To achieve carbon neutrality by 2050, it is critical for Japan to develop innovative technologies that are unprecedented and implement them in society. To realize this, we must immediately strive to put in place an environment that can draw as much investment as possible from both the public sector and the private sector. In securing the financial resources necessary for these initiatives, Japan must clarify the concrete steps it should take to rebuild the country's finances that have been severely damaged by the COVID-19 pandemic.

Japan has no time to waste. The next three years will be the perfect time to reverse the low growth trend that has gripped our country over the past 30 years and replace that trend with a virtuous cycle of growth and redistribution. We want the Japanese government to exercise leadership in transforming the country by facing up to the issues gripping Japan and taking concrete measures to address them.

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