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

October 10, 2017

House of Representatives Election

The upcoming House of Representatives election is important in a number of respects. The results of the past five years of the Abe administration regarding its economic, diplomatic, national security, and other policies, will be subject to much debate during the election campaign and put to the judgment of the Japanese people. For its part, the business community has a high opinion of the results achieved by the Abe administration in areas such as the economy, foreign affairs, and security. By its very nature, political stability is a prerequisite for economic growth, and it is the hope of the business community that the ruling parties will secure a stable majority of seats in the election and that such political stability will continue. We hope that, through the campaign, the individual parties will clearly state their concrete economic, security, and social security policies and that lively policy debate will ensue. The political landscape has divided into three poles — the ruling parties of the LDP and Komeito, the Party of Hope and the Nippon Ishin no Kai, and the Constitutional Democratic Party of Japan and the Japanese Communist Party, which has made the situation easy for voters to understand. We hope that voters will make a careful assessment of the policies before they cast their votes.

I believe that the decision by Tokyo Governor and Party of Hope leader, Yuriko Koike, not to run in the election herself is only understandable given the extremely heavy responsibilities of her position as Governor. She will be wearing two hats as the leader of a political party and the Tokyo Governor, but I hope she will devote her utmost efforts to the preparations for the 2020 Tokyo Olympics and Paralympics. I also hope she will move forward with resolving the various challenges facing the Tokyo government, including the relocation of the Tsukiji fish market. On the question of the party's nomination for head of government, I understand that appropriate action will be taken after the election.

Retained Earnings

Merely freezing the consumption tax rate could not be described as a responsible policy, and the parties need to indicate an alternative source of treasury funds throughout the election campaign. We are watching the Party of Hope's proposal for a tax on retained earnings closely. However, taxing earnings after corporate income tax has been paid would constitute double taxation. Internationally, this kind of tax on retained earnings is not seen elsewhere in the world, with few exceptions. The Party of Hope appears to be considering a 2% tax on the 300 trillion yen in retained earnings held by Japan's biggest companies, but that figure of 300 trillion yen comes only from balance-sheet figures, and it does not mean that all of it is held in cash. Those sums have been converted into a variety of forms through investments such as M&As and capital investments. If those investments were to be taxed, it would have a negative impact on proactive investment, something that is essential to breaking out of the deflationary cycle and rebuilding the economy. For this reason as well, the taxation of retained earnings presents a problem and is unacceptable to the business community.

For a start, of the 406 trillion yen in retained earnings, about 210 trillion yen is in cash and cash deposits. This equates to 1.74 months of sales revenue. This is an extremely appropriate level of working capital for a company, neither too much nor too little. Any accusations that companies are holding onto excessive amounts of cash are completely off the mark. In particular, small and medium enterprises, having learned their lesson from the global financial crisis, do now retain a certain level of cash, which is an understandable business management decision.

In the course of discussions for next fiscal year's report of the Committee on Management and Labor Policy, we see the question of how to pass company earnings onto workers in anticipation of a positive economic cycle is a key issue. In particular, from the perspective of expanding consumption, it is a problem that the benefits of wage rises are not easily making their way to workers in their thirties and forties, who have a higher propensity to consume. Companies have an immense role to play in striving to achieve a positive economic cycle. We hope to indicate in next fiscal year's Committee on Management and Labor Policy report the business community's thinking on what would be the best way to pass on company earnings to workers, whether it be by raising wages, paying various allowances, or other means. In any event, we do not think of retained earnings or cash and cash deposits as a reason for compensating workers.

TPP 11

Regarding TPP 11, we are currently in the process of preparing joint recommendations from the four business community organizations, and, at the appropriate time, we will call on the government to implement those recommendations promptly. We had hoped that the TPP would proceed with 12 members, including the United States, but the United States has withdrawn. However, the TPP is an extremely important framework from the perspective of building a free and open international economic order in the Asia-Pacific region. It will also be an important program infrastructure for Japanese companies that have supply chains in this region. While hoping that the United States will return to the negotiating table, I hope that the 11 remaining countries will realize the TPP quickly, with its sophisticated and comprehensive contents intact.

Although a Japan-U.S. FTA may be on the agenda at the second round of Japan-U.S. economic dialogue next week, for its part, the business community hopes that discussions will proceed toward the prioritization of multilateral frameworks.

Japan-U.S. Relations

During our mission to the U.S. from the end of October, we hope to communicate, from the business community's standpoint, that the Japan-U.S. relationship is the most important bilateral relationship on all fronts, including politics, the economy, and diplomacy. We will also stress the fact that Japanese companies are actively investing directly in the United States and carrying out business activities that are rooted in local communities. Japanese companies have a combined 50 trillion yen in direct investments in the United States, which is on a par with investments from the United Kingdom. In terms of jobs as well, Japanese companies employ a total of 860,000 people directly, and if we include indirect employment, that number climbs to 1.6 million jobs. Moreover, Japanese companies in the United States are contributing to the expansion of American exports more than any other country's companies. During the mission, we intend to impress on people these facts about our contribution to the U.S. economy. The Japan-U.S. relationship has come through a period of economic friction and we have now built an amicable, win-win relationship based on mutual trust.

Revision of the Charter of Corporate Behavior

As times have changed, the Charter of Corporate Behavior has undergone reviews to reflect the important issues of the day. It was originally developed to counter anti-social forces, but as demand grew for the importance of CSR, the Charter was revised to reflect that. The Charter is now to be revised again from the perspective of the achievement of SDGs through the realization of Society 5.0. From the viewpoint that the purpose of corporate activity is to resolve social issues on a global scale, action that aims to realize Society 5.0 and achieve the SDGs has been incorporated into our action policy.

Evaluation of Political Parties' Policies

In this year's policy evaluations, as was the case in previous years, we evaluated the performance of the ruling parties in light of Keidanren's business policies, that is, how they addressed those policies and what kind of results they have achieved. The evaluation also indicates what issues remain. Overall, the ruling LDP-Komeito coalition shares with Keidanren the same recognition of the issues regarding important policies, and in terms of results, they have steadily executed their policies in areas such as the economy and diplomacy. They are to be highly commended for those results. As with previous years, the evaluations will be published some time in October.

Corporate Scandals

Kobe Steel, Ltd. and Nissan Motor Co., Ltd. are both manufacturing businesses that represent Japan's manufacturing industry, and it is truly disappointing that there have been irregularities in those companies. Behind the international confidence in Japanese manufacturing lies an overwhelmingly high level of quality. For this very reason, these incidents are serious matters that have the potential to adversely affect the trust held in Japan's manufacturing industry. I hope these companies will seek out an accurate picture of the situation, identify the causes of the irregularities and take thorough action to prevent the same thing from happening again.