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

May 22, 2017

Sources of Financing for Education

As a percentage of GDP, public expenditures for education in Japan have trended below the average for OECD member-nations, and investing more in education has become a challenge. I see nothing wrong with society as a whole exploring ways to invest in our future: for example, the idea of making preschool education free or expanding opportunities for education.

Various approaches to financing have been discussed. Floating government bonds for education is one idea. However, given the already bleak situation for public finances in Japan, I think we should avoid impulsively floating such bonds and placing another burden on the shoulders of future generations. Additionally, in proposals that it announced on April 27, Keidanren cited issues with the notion of "children's insurance," namely, increasing social insurance premiums as a way of generating more revenue to fund education. In particular, we need to carefully explore the issues of fairly balancing the burden for each generation as well as across different generations, and also how the money is to be used. Our position at Keidanren is that tax revenues should be the prime source of funding for education in Japan. It will be crucial to fully discuss and debate this issue going forward.

Fiscal Restructuring

As Chairman of Keidanren, Chair of the Council on Fiscal Systems, and a member of the Council on Economic and Fiscal Policy, I do not think we should abandon the goal of achieving a budget surplus in the primary balance by 2020. I realize this will be a tough goal to meet but it is not something we should play down. Although some estimates have been made for a scenario with the budget surplus coming one or two years after 2020, it's important that we push for ways to boost tax revenue through economic growth while also implementing additional spending cuts. If we do that, achieving a budget surplus in the primary balance by 2020 will not be out of reach. We shouldn't let go of the budget surplus goal or set new targets for the debt-to-GDP ratio. Achieving a budget surplus is a must. Also, our government has made a pledge to the nation as well as the international community that it will increase the consumption tax rate in October 2019. We certainly want to see that rate hike implemented.

As additional steps toward fiscal restructuring, measures in fiscal reform at the local government level will also be vital. Now that fiscal transfers are being implemented with local allocation taxes, I have to admit I was quite surprised to learn that local governments altogether have a fund surplus of as much as 21 trillion yen. Local governments should uphold their accountability and explain why these funds are being collected. Otherwise, they will not be able to win understanding from the companies and residents that pay local taxes. I would like to see the Ministry of Internal Affairs and Communications explore approaches that will help shed light on what needs to be done to achieve reforms in this area.

Work Holiday Diversification

The Japanese government is currently exploring the idea of instituting a "Kids Week" holiday period. This is something along the lines of a proposal I tendered during policy dialogues with government officials in March last year, and I welcome it. It's an important theme because it could help re-energize the domestic travel industry and spur more tourism. In 2004, Japan's domestic travel industry had a market scale of 28 trillion yen. By 2012, the market had slipped in scale to 20 trillion yen -- a contraction of 8 trillion yen in value. The tourism industry could potentially reap huge economic benefits. It's crucial that "Kids Week" be exploited to revitalize the industry and help it regain at least some of its former market scale.

Access to longer vacation periods along with the diversification of work holidays will be key to fostering a boom in tourism. Although most companies now have systems for paid leave and other types of leave in place, school holidays are still fixed. If school holidays could be managed with more flexibility, many families would be better able to enjoy longer work holidays. As it is, even if mom and dad are able to take holiday leave, the kids might still be stuck in school. So, why not remedy this situation and allow individual schools to observe their holidays on a more flexible basis? That was the gist of my proposal. I would like to see the government come up with a solid design for such a system and carry it to implementation. Keidanren, for its part, will call on its member-companies to take steps to boost the number of days of leave their employees take each year.

Trans-Pacific Partnership

The recent ministerial meeting in Hanoi by the 11 members of the Trans-Pacific Partnership concluded with a joint statement that specifically re-affirmed the strategic and economic significance of the TPP, committed to early implementation of the TPP agreement, and incorporated plans to launch a process for the evaluation of future options including initiatives aimed at encouraging the participation of the US. I welcome the clear confirmation of the commitment by the 11 member-nations to implement the TPP agreement at an early date. I understand that a high working-level meeting is scheduled to convene in Tokyo in July, and I hope the Japanese government will demonstrate strong leadership at that gathering. I also look forward to a demonstration of support for an 11-member TPP agreement at the upcoming APEC summit in November.

The US government has indicated its readiness to pursue negotiations with Japan on a bilateral free-trade agreement. Perhaps the successful conclusion of a TPP agreement will enable bilateral negotiations with the US to set the stage for the integration of an FTA with the TPP at some point in the future. Although I am hopeful that we will ultimately have a 12-member TPP that includes the US, for now I want to see solid progress made toward a TPP 11 deal.

Japan-China Relations

I recently attended the Belt and Road Forum summit on international cooperation in Beijing and came away impressed that it was a resounding success. In remarks delivered at the opening ceremony, Chinese President Xi Jinping called for the development of an initiative along five paths -- the paths of peace, prosperity, open markets, innovation, and culture -- backed by international cooperation to promote the creation of a giant Eurasian economic zone encompassing Asia, Europe, and Africa. Xi Jinping insisted that this initiative would not include geopolitical or military overtones. Headed by LDP Secretary General Toshihiro Nikai, the Japanese delegation to the forum announced that the Japanese government will be an active participant. I believe that was received as an important message not only to China but the international community as a whole. Although the Belt and Road Initiative touts improved linkages between infrastructure and free and unimpeded trade, the degree of enthusiasm shown by nations that participated in the forum was clearly mixed. Whereas some countries expressed misgivings about potential political motives, others were concerned about the burden of infrastructure development. However, on the whole, most were committed to actively participating in the Belt and Road Initiative.

I attended a meeting by LDP Secretary General Nikai and President Xi Jinping on May 16. Nikai delivered a personal letter from Prime Minister Abe to Xi Jinping, who, upon reading it, replied that while Japan and China have some issues to work out, he wanted to help build a friendly bilateral relationship that looks to the future.

Japan and China are currently planning a variety of events to celebrate the 45th anniversary this year of the normalization of diplomatic ties and in 2018, the 40th anniversary of the signing of their Treaty of Peace and Friendship. I currently head the Steering Committee for Promotion of Bilateral Exchange in Celebration of the 45th Anniversary of Normalization and 40th Anniversary of the Signing of the Peace Treaty between Japan and China, with LDP Secretary General Nikai being the top advisor. Over the next two years, organizers will promote a variety of ventures in bilateral exchange not only within the diplomatic and trade arenas but also at the grassroots level, including cultural, science, and sporting events. We want to make both 2017 and 2018 symbolic years of friendship ties between Japan and China. First up will be the Japan-China Green Expo that kicks off in Beijing on June 13 to showcase Japan's advanced technologies in the environmental field. The last Japan-China Green Expo was held in 2011 but in 2012 it was canceled just before its opening date and suspended for several years thereafter due to pending issues between Japan and China. However, the upcoming expo this June will be held as a special event in celebration of the 45th anniversary of the normalization of bilateral ties. December this year will occasion the Third Japan-China Business Leader and Former High-Level Government Official Dialogue. Together, these events will serve as key foundations for improved friendship ties between Japan and China in the economic dimension. I look forward to seeing a multilayered mix of events in exchange and want to aid the development of stronger Japan-China ties.

Constitutional Issues

I understand that Prime Minister Abe is still pursuing policies that give the economy top priority. I do not believe his administration has abandoned those policies, nor am I worried that they will. I do want them to stay the course on this. With the destabilizing trends now under way worldwide, I accept that as president of the ruling Liberal Democratic Party, Prime Minister Abe has proposed to revise provisions of the Japanese Constitution out of concern that certain constitutional issues will otherwise remain unaddressed.

Executives' Comments