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Executives' Comments  Press Conferences Chairman Sakakibara's Statements and Comments
at His Press Conference

December 21, 2015

Fiscal 2016 budget, fiscal consolidation

The government plans to incorporate the fundamental concept of achieving the dual objectives of restoring sound public finance and ensuring economic growth into its fiscal 2016 budget now being drafted. We wish the government will tackle the objectives in an unwavering manner. The government has put in place an intermediary target of reducing the budget deficit to 1% or less of gross domestic product (GDP) in fiscal 2018 en route to achieving the major goal of bringing the primary balance into the black in fiscal 2020, thus showing its determination to attain fiscal consolidation in an unswerving fashion. As reiterated before, it is necessary to make efforts on the three fronts of economic growth, expenditure overhaul and revenue reform in order to achieve fiscal soundness. Of these main pillars, economic growth is a prerequisite condition, and we recognize expenditure overhaul as particularly important.

Meanwhile, the Council on Economic and Fiscal Policy is making considerably drastic efforts for specific reform of the social security system. The council has listed fairly ambitious plans for 44 individual items on the reform agenda, making us feel the government's strong will and determination. We expect the social security reform to go ahead from now on. As for the national budget for the next fiscal year beginning in April 2016, spending requests are being screened to a considerable extent by making budget items visible. The government is responding to key allocation requests one by one while comparing budget items for which spending has been made efficient with those yet to be made so. For example, regional gaps in healthcare expenses are being screened in a minute manner in terms of their specific details.

In the past year, the government has undertaken efforts for fiscal consolidation in full swing, and the fiscal 2016 budget is being drafted in this direction. As for the social security budget, the government is endeavoring to allow a spending increase of 500 billion yen in fiscal 2016 in line with the basic policy of holding down the total amount of increase in the next three years to 1.5 trillion yen or less. The planned increase in the fiscal 2016 social security budget is edging toward reality through a reduction in medical and technical service payments under the national health insurance system, among other measures. We think this deserves a high mark.

On the other hand, we regret the government move to hand out "one-time subsidies" to low-income pensioners. We wanted the government to spend more time on the payout plan before deciding to do so from the viewpoint of ensuring compatibility with its policy line pursued so far. This is not in line with the general trend of moving the focus of support from elderly people to childrearing families.

BOJ's supplementary credit easing

We understand that the Bank of Japan's latest decision to take a supplementary credit-easing measure is intended to support, as the central bank, companies actively investing in plant and equipment as well as in human resources. We take it as a message that the BOJ desires the business community to increase investment in plant and equipment and human talent. However, we believe the direct effect of the measure will be limited in view of its size: an annual purchase worth 300 billion yen in exchange-traded funds, and its form: an additional quota of ETF purchases.

The challenges that Japan should tackle as top priorities are to pull out of deflation and achieve economic rebirth. The government, bureaucracy and private sector must employ each and every policy measure to ensure a virtuous economic cycle for the purpose. The government has requested the business community to expand investment in plant and equipment and increase wages. We are of the same view and expect to do so in a voluntary manner. We believe the BOJ's latest supplementary action is a message as the central bank reflecting the intention of the government, bureaucracy and private sector to combine their energies into efforts for emergence from deflation.

Expansion of domestic fixed investment

Corporate investment has various forms such as plant and equipment investment at home and abroad, M&A investment at home and abroad, and R&D investment. In the recent several years, business investment has been expanding, particularly in the overseas segment and in M&A deals. On the other hand, domestic investment is moderate in growth. At the dialogue between the public and private sectors the other day, I said it would be possible to increase domestic investment by some 10 trillion yen in three years if such investment is put on an equal footing with other forms of investment by promoting policy support and improving the business environment. As a prerequisite condition for that, we listed nine items then, including improvement in the business environment. As a first step in that direction, the government has decided to lower the effective corporate tax rate. If the government continues to squarely address challenges such as deregulation and energy issues, not only domestic investment by Japanese companies but also investment in Japan by foreign firms will increase in the future.

Business restructuring

Toshiba Corp. is pushing ahead with business restructuring in response to the issue of its inappropriate accounting practice in the past. We believe a sweeping structural reform will be a step in the right direction for the future of the company.

Other Japanese companies are grappling with business restructuring but they may be still halfway down the road. There are various arguments over corporate mergers and industry reorganizations. In Japan, we have many players and, generally speaking, industry realignment is necessary. I believe the business community as a whole will proceed in that direction. But Japan has its own peculiar business climate and each company has different characteristics. Given these factors, integration and realignment are not the sole solution.

Lower tax rate

As for the issue of sorting out products subject to a lower tax rate at the time of a hike in the standard consumption tax, we hope the ruling coalition will boil down details of the matter in a proper fashion to minimize confusion on the front line and make it easy to understand. Right now, a broadly supported plan is to include processed food and newspapers in the projected lower rate. This categorization is relatively easy to understand and we think the coverage of newspapers is a wise judgment. Moreover, it is an important task to reduce the burden of clerical work on small and medium-size companies as well as tiny businesses when a lower rate is introduced. We wish the government will address the issue in an unwavering manner. And, furthermore, a precondition for the proposed lower rate is to secure necessary financial resources. From the viewpoint of fiscal consolidation as well, it is essential to secure permanent financial resources by exercising wisdom by the time a lower rate is introduced in April 2017.

ASEAN Economic Community (AEC)

We are pinning high hopes on the ASEAN Economic Community (AEC) that will come into being by the end of this year. The birth of the gigantic market comprising 10 countries with a combined population of 600 million is expected to lead the world economy as one of growth centers. Japanese companies already have production, distribution, marketing and other footholds in place within the Association of Southeast Asian Nations region. If liberalization makes progress in such fields as products and services, trade and investment, and labor force transfers, it is expected to further beef up global supply chains in ASEAN. The launch of the AEC will be a big plus for the global strategy of Japanese businesses. On our part, Keidanren expects to send economic missions to ASEAN member countries next year and thereafter in an effort to help smoothen Japanese business operations in the region, and cement economic relations with them.

Defense budget

As for the defense budget for the new fiscal year, we understand it is based on Japan's position in today's international situation. It does not follow that a defense budget increase results in the expansion of business opportunities. We understand that budgetary allocations are set aside for what is essential in the context of defending Japan's peace and security as well as people's lives and wealth.

Acquittal of Sankei's ex-Seoul bureau chief

We would like to think highly of the recent South Korean court verdict that found the Sankei Shimbun newspaper's former Seoul bureau chief not guilty of defamation charges. South Korea's Constitution guarantees the freedom of speech and we understand the acquittal came in that perspective.

Today, relations between Japan and South Korea are making good headway toward improvement as reflected in such developments as the recent bilateral summit meeting and the start of talks on the "comfort women" issue. We believe the court ruling has eliminated another obstacle to bilateral ties and will help improve them further in various aspects from now on.

Executives' Comments