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

December 19, 2016

Looking Back over 2016

For the business community, 2016 was the year when Japan, energized by the policies of Abenomics, made serious efforts to end deflation and revitalize its economy, and signs of economic revival began to appear. At the same time, it became clear that greater efforts are required to address key policy issues including social security reform, fiscal reconstruction, and changes to working styles. This was also a year of turbulence in the international community. There is an urgent need to stem the rising tides of protectionism, populism, and anti-globalism.

Without doubt, this was a year when initial steps were taken to address a wide array of issues. True to our motto of "Policy and Action," Keidanren not only proposed policies, but also urged the government and other key players to work towards vital goals.

Spring Labor-Management Wage Dialogues

The Committee on Management and Labor Policy conducted final discussions with a view to publication of its 2017 report. Keidanren finalized guiding principles for next year's spring labor-management wage dialogues under current economic circumstances. In summing up the discussion, it was noted that a key theme is maintaining momentum for wage rises in light of Prime Minister Abe's requests in the Council to Realize Working-Style Reform and society-wide calls to bring about a virtuous economic cycle. Similarly to this year, the Committee was able to reach agreement on a fundamental policy of urging wage increases based on annual incomes.

Each company will identify specific methods of raising wages in terms of annual incomes that are suited to its particular circumstances, and select from diverse possibilities including periodic pay rises, pay scale increases, bonuses, and allowances. Pay scale increases are one option for increasing wages based on annual incomes.

Prime Minister Abe has requested wage rises of at least the same level as the previous year, pay scale increases for the fourth consecutive year, discussion that takes account of the expected inflation rate, and enhanced terms of trade for dealings between big companies and small or medium-sized enterprises. The Committee's report will set out Keidanren's thoughts on each of these requests. Regarding the expected inflation rate, consumer price levels have never been a major deciding factor in spring labor-management wage dialogues. Even if inflation is considered, in most cases discussion is about actual rather than anticipated rates, but the expected inflation rate can be considered as one factor in talks.

Budget-setting for Next Fiscal Year

Managing to restrict growth in social security spending to around 500 billion yen represents significant progress. Although careful scrutiny will be required, priority allocation of funding for policies contributing to structural reform has been confirmed, together with adherence to the current direction of reducing issuance of new government bonds from a fiscal discipline perspective. It will be important to swiftly approve proposed budgets in the next ordinary session of the Diet, and to move ahead with policy implementation.

Further cuts are required in the area of social security reform. The Council on Economic and Fiscal Policy will make greater efforts aimed at streamlining social security expenditure.

Monetary Policy

As the public and private sectors mobilize policy measures to end deflation and revitalize the economy, we welcome the Bank of Japan's commitment to continuing monetary easing until inflation reaches its 2% price stability target. However, more time will be required before achievement of this target produces results. In a comprehensive assessment of quantitative and qualitative easing conducted last fall, the BOJ cited slowdown in emerging economies, declining oil prices, and weakness in demand following the consumption tax increase as the main reasons for not achieving the price stability target, and these factors are understandable.

Domestic and international economic conditions continue to change. The Chinese economy is gradually improving, oil prices are rising after concerted production cuts agreed by OPEC nations, and domestic consumption is picking up. A gradual upturn in consumer prices is also anticipated.

Working Style Reform

Keidanren's fundamental position on equal pay for equal work is that where unjustifiable wage disparities exist for the same kind of work within a particular company, these should be rectified, and this view is shared by the government. As I have repeatedly stated, we hope to see guidelines that take full account of employment practices and wage-setting mechanisms established by Japanese enterprises over a long period of time.

Although some companies have pointed out that achieving equal pay for equal work will increase their personnel expenses and impose a heavier financial burden, costs will not rise immediately upon introduction of new pay systems. However, enterprises are concerned that rectification of unjustifiable disparities will lead to upward pressure on personnel expenditure, and this needs to be dealt with carefully. The decline in overtime allowances as long working hours are reduced should also be considered. Companies need to think in terms of overall personnel expenditure.

Cabinet Approval Ratings

Cabinet approval ratings fluctuate according to the important issues of the day, but as indicated by the Upper House elections in July, support for the Abe administration is high. Actual approval ratings exceed 50%. Since the recent Japan-Russia leaders' meeting generated such high expectations, some people may have felt a little disappointed by the outcome, but the meeting should be recognized as a step forward in addressing very challenging issues.

Japan-Russia Relations

President Vladimir Putin's visit to Japan presented an opportunity for agreement on 68 joint private-sector projects in accordance with the eight-point plan for economic cooperation proposed by Prime Minister Abe. Keidanren's role is to create an environment conducive to progress on such collaborative projects. The business environment in Russia is not yet fully developed, and issues still to be addressed include inadequate legal frameworks and complex, time-consuming approval procedures. There are also deficiencies in urban functions and fundamental infrastructure such as roads, ports, and railways. Keidanren will urge improvements to such aspects of the business environment and provide backing to specific projects.

From a business standpoint, projects must be profitable. I hope that a relationship of trust will be fostered between Japan and Russia, and that this will lead to the conclusion of a peace treaty.

Executives' Comments