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Policy Proposals  Comprehensive Strategy Creating a More Affluent and Vibrant Japan Fiscal 2015 Organization Policy

June 2, 2015

The Abe administration's domestic and foreign policy measures are bearing fruit, and the Japanese economy is steadily recovering its vitality. With emergence from the country's deflationary phase now in sight, people are starting to have a more positive outlook on the future, and companies are shifting to more active, growth-oriented management.

We cannot be overly optimistic about the future, however. A mass of structural problems remain, among them the impending impact of a rapidly aging society and declining population, the ongoing budget deficit and expanding long-term debt, rapidly increasing social security benefits, the energy problems resulting from the shutdown of the nation's nuclear power plants, concerns about a possible current account deficit, and the need to respond to accelerating globalization. Other pressing issues include the need to restore vitality to regional economies and to find solutions to global problems such as the environment and natural resources.

To overcome these challenges and create an energetic economy and society that we can pass on to the next generation, it will be necessary to carry out bold reforms of existing systems and practices. In addition, we need a new way of thinking about problems: the mindset of corporate executives, the awareness of the general population, and the conventional wisdoms of society all need to become more forward-looking and positive if we are to succeed in shaping a better future.

In January this year, Keidanren released Toward the Creation of a More Affluent and Vibrant Japan, a vision of how the country should look in 2030. Underpinning this vision is an understanding that innovation and globalization lie at the very source of economic vitality. We have set fiscal 2015 as the year in which we will take the first concrete steps toward making the economy and society laid out in that vision a reality. Working more closely than ever with the nation's political leaders, we will take solid measures to address the priority policy issues outlined below. These steps, we believe, will help to lift the economy out of deflation, ushering in a virtuous economic cycle that will lead to economic revitalization.

1. Accelerating post-earthquake reconstruction and making a "New Tohoku" a reality

There can be no regeneration for Japan as a whole without a thorough rebuilding of the Tohoku region. From the perspective of accelerating post-disaster recovery in the region, the government needs to carry out a thorough study of the overall conditions and the current state of reconstruction projects, identifying problems that still need to be addressed, and clarifying what measures will be put in place after the concentrated reconstruction period is over.

In addition to supporting the rebuilding of industry and the creation of new industries in the region, Keidanren will play its part by calling on member companies to cooperate by lending human support to the Reconstruction Agency and municipal authorities in the stricken areas and boosting consumption of local products.

2. Promoting fiscal soundness and reform of the social security system

Establishing a sustainable fiscal structure is an important obligation that we owe to future generations. In spite of this, the current state of Japan's finances is the most serious of any leading economy. We urge the government to formulate and carry through, with all its might, a concrete plan for achieving a primary balance surplus by fiscal 2020.

This will be achieved through a combination of three main pillars: emergence from deflation and economic revitalization, reform of annual expenditure, and reform of annual revenue. The proposed increase in the consumption tax rate needs to go ahead as scheduled in April 2017. To ensure the sustainability of the social security system, there should be a reevaluation of how the burden of supporting the system is shared and moves should be taken to ensure that benefit payments are efficient and appropriate.

Keidanren will endeavor to increase understanding of the need for fiscal soundness and reform of the social security system, and will work to inform and educate companies about the importance of fostering employee health as a management strategy.

3. Realizing reforms of the tax and administration systems

From the perspective of boosting Japan's locational competitiveness and making companies more internationally competitive, we will aim for a prompt lowering of the effective corporate tax rate to below 30%, and will lobby for an additional decrease in the tax rate in the fiscal 2016 tax reform.

We will promote electronic administration services, reforms of local government administration, and regulatory reforms to bring about a more streamlined and efficient administrative system. As part of this, we will aim for the smooth introduction of the My Number social security and tax identity system and a gradual expansion of its use. In promoting electronic administration services, both national and local governments should carry out reforms of the way they provide services, taking information and communications technology as a given. With a view to the introduction of the "doshu-sei" regional government system in the future, we will lobby for a shift of government bodies and functions to the regions and a thorough transfer of the authority to grant permits and approvals to regional department offices.

Keidanren will use the experiences of member companies to assist reforms of how the government provides services.

4. Addressing energy and environmental issues

We will aim for a restart of nuclear power stations whose safety has been confirmed, and call for a reexamination of the feed-in tariff scheme and the tax for climate change mitigation. First, we need to formulate an appropriate energy mix that includes a share of over 25% from nuclear power in 2030. With an eye toward COP 21 at the end of the year, we will call for greenhouse gas reduction targets that are internationally equitable and realistically attainable and that do not impose an unreasonable burden on the population. Japan should also play a responsible role as a developed economy by propagating its outstanding low carbon technology and developing revolutionary new technologies that will help to reduce long-term emissions on a global scale.

Keidanren will play an active and positive role in finding solutions to global warming by steadily implementing our Commitment to a Low Carbon Society.

5. Cultivating core industries and creating new opportunities for growth

We will endeavor to cultivate new core industries that will play a leading role in the Japanese economy of the future. To this end, we will work to promote technology development and stimulate industries relating to the IoT (Internet of Things), artificial intelligence, robots, smart cities, biotechnology, marine resources development, and aerospace. We will work to create financial and capital markets that will contribute to encouraging entrepreneurship, economic growth, and structural reforms of industry, and to build a business environment that will be conducive to using information and communications technology to boost productivity.

At Keidanren, we will call on companies to shake off the deflationary mindset and implement positive approaches to management, investing proactively in facilities and research and development and creating new growth opportunities.

6. Promoting policies for science, technology, and innovation

We will urge the government to explicitly set the target of increasing government research and development investment to 1% of GDP in the Fifth Science and Technology Basic Plan and then to achieve that goal. In addition to continuing and expanding innovative research and development programs involving government ministries and agencies such as ImPACT (Impulsing Paradigm Change through Disruptive Technologies) Program and SIP (Strategic Innovation Program), we will encourage the reform of universities and research and development corporations.

At Keidanren, we will help to implement the government's science and technology policies, including by continuing to dispatch human resources from companies to the Secretariat of the Council for Science, Technology and Innovation.

7. Revitalizing regional economies and encouraging new creativity in the regions

As well as strengthening the competitiveness of core companies in the regions, we will aim to revitalize agriculture and tourism. We will support business involvement in agriculture and encourage larger-scale agribusiness through consolidation of farmland, as well as strengthening the systems in place to promote Japan as a tourist destination and encouraging collaboration among tourism organizations across a wide area. We will endeavor to bring about more compact and networked cities and promote measures to prevent and mitigate natural disasters, working to create attractive and robust cities and regions.

Keidanren will look to strengthen its collaborations and exchanges with regional economic groups in order to share awareness of challenges and support efforts to address them.

8. Promoting regional economic partnership agreements and expanding international economic exchange

The TPP (Trans-Pacific Partnership) is essential if Japan's economy is to grow together with the burgeoning economies of the Asia-Pacific region. We will lobby strongly for a prompt conclusion of this agreement. We will also aim for conclusion of the RCEP (Regional Comprehensive Economic Partnership) as well as a Japan-China-South Korea Free Trade Agreement and a Japan-EU Economic Partnership Agreement by around the end of this year. The public and private sectors should work together to actively promote the deployment of infrastructure overseas and to create conditions that will increase direct investment by Japanese companies abroad and encourage direct investment in Japan from other countries.

Keidanren will play its part in consolidating relations with the United States and our Asian neighbors by actively promoting private sector economic diplomacy. These efforts will include dispatching missions to the United States and China, holding events to commemorate 50 years of normalization of diplomatic relations with South Korea together with the Federation of Korean Industries, and hosting an Asian Business Summit. Through these undertakings, we will endeavor to boost Japan's presence in the international community.

9. Responding to the problem of Japan's declining population

Society as a whole needs to immediately address this issue with all the resources at its disposal if we are to maintain the population at a level of 100 million people in 50 years from now. We will lobby the government to ensure sufficient funding to achieve targeted spending equivalent to 3% of GDP on child- and family-related benefits, and to cooperate with the private sector in order to address the problem of people stuck in non-regular employment, to develop jobs for young people in the regions, to support a better work-life balance, and to otherwise create conditions that will allow people to marry and start families at a younger age.

Keidanren will work to publicize encouraging examples of work styles that are conducive to a better work-life balance. Also, in addition to promoting reforms of the way people work and take vacation leave, we will aim for prompt reform of the working hours system to support more diverse work styles.

In order to tap the rich knowledge and experience of the senior generation, Keidanren will work to collect and publicize forward-looking examples of efforts by companies to make effective use of senior employees.

To encourage active involvement of foreign human resources, in addition to proactively welcoming highly skilled workers, there should be efforts to provide conditions that will make it easier to accept workers in a wide range of fields, taking into account, in particular, the changing composition of industry and population.

10. Advancing human resources development, education revitalization, and university reforms

To help achieve innovation and to develop human resources capable of playing an active role on a global level, we will lobby for the promotion of English education with a focus on communication skills and a radical expansion of teaching in the sciences, at primary and secondary level. To reform education at the tertiary level, we will support reforms of university governance through leadership by presidents, reforms of university entrance examinations, and steady implementation of the National University Reform Plan. We will encourage Japanese universities to become more international, especially by welcoming talented students and faculty from overseas, sending more students to study abroad, and strengthening their liaisons with universities in other countries.

At Keidanren, we will continue to implement our Global-Minded Human Resources Development Projects, including by dispatching people from companies as instructors to educational institutions.

11. Encouraging women's active participation in the workforce

With the aim of encouraging greater involvement of women in the workforce, we call for tax and social security systems that have neutral impacts on women's work styles.

At Keidanren, in addition to continuing to call on member companies to draw up and make public their voluntary action plans on promotion of women to managerial and board positions, we will work to train women employees for managerial roles and to encourage greater awareness and new thinking among managers. We will collaborate with government and the education sector to provide fuller career education for women prior to joining the workforce, and to encourage women to enter into the field of science and engineering.

12. Strengthening measures against cybersecurity threats

The government should commit itself to defending vital infrastructure and systems from cyberattacks and collaborate internationally to strengthen cybersecurity measures. Government and the private sector should work together to reinforce information sharing, carry out practice drills, develop new technology, and train specialized human resources.

At Keidanren, we regard cybersecurity not simply as a technology problem but as a serious challenge for corporate management. We will work to encourage cooperation among companies in different sectors and to bring about a greater awareness of the issue among corporate executives.

13. Working positively toward the Tokyo Olympics and Paralympics

Careful preparations are necessary to ensure that hosting the Tokyo Olympics and Paralympics is used as an opportunity for boosting medium- to long-term economic growth. With concentrated cyberattacks predicted on related facilities as well as government bodies and companies in the lead-up to the games, government and the private sector should work together to take measures to improve preparedness.

Keidanren will work actively toward the success and legacy of the games through the Olympics and Paralympics Business Council and other means, together with the Japan Chamber of Commerce and Industry, the Tokyo Chamber of Commerce and Industry, and Keizai Doyukai.

14. Carrying out reforms within Keidanren

Keidanren will work to further increase the trust and expectations placed in us by society and will work harder than ever to recommend policies, engage in lobbying and other activities, and provide information and opinion internationally, demonstrating the determination to take the lead in reforming our economy and society. To this end, we will reorganize our policy committees and work toward more energetic exchange of opinions with regional economic groups and closer linkups with other economic groups. We will also strengthen Keidanren's ability to carry out activities overseas by reinvigorating our international network of offices, including the reopening of our US Office.

Comprehensive Strategy