- Response to Quality Control Irregularities
- Spring Labor-Management Wage Dialogues
- Request for Increased Corporate Contributions to Childcare Policy
- Tax Reform
- U.S. Corporate Tax Reform
- Japan-China Relations
Response to Quality Control Irregularities
My view of the continued revelations of inappropriate quality control is that this is a grave situation that has the potential to erode international trust, as well as the trust of the Japanese public, in Japanese companies.
For its part, Keidanren will first call on its member companies and organizations to be thorough in their investigations of the irregularities and their compliance with laws and regulations and their contracts. If any legal breaches are confirmed, in accordance with the Charter of Corporate Behavior, they should promptly disclose the facts and top management themselves should engage wholeheartedly in the task of solving the problem and investigating the root causes. At that time, we would ask them to report to Keidanren, and the findings would be compiled and made public. Further, to be thorough in the prevention of recurrences, Keidanren will invite the Ministry of Economy, Trade and Industry and the Ministry of Land, Infrastructure, Transport and Tourism to hold a briefing for our member companies and organizations. We will do everything in our power to help restore trust and confidence in Japanese companies.
Legal compliance and an emphasis on customers are the major premises of corporate management. In the case of business-to-business transactions, because the number and range of customers are limited and contracts are concluded with individual customers, there are cases in which, even when problems occur, they can be resolved through consultations between the parties. Contracts contain clauses regarding confidentiality and trade secrets, so not everything can be made public. Top management will base their overall decisions on whether or not to make information public on factors such as the individual circumstances, the gravity of the problem, and the details of the contract. In the case of business-to-consumer transactions, on the other hand, the situation is very different. Any problems such as legal breaches and product recalls must be made public immediately.
Spring Labor-Management Wage Dialogues
To ensure a virtuous economic cycle and economic recovery, the business community has implemented wage rises for the past four consecutive years. It is important that we keep up this momentum. Taking into account Prime Minister Abe's indicated expectations of a 3% wage rise and other social demands, for its part, Keidanren will present specific policies for diverse wage increases and improvement of conditions, and encourage debate between management and labor in the individual companies. Decisions on wage rises must always be left to each individual company, but Keidanren will ask them to adopt a forward-looking approach to wage rises for the sake of the virtuous economic cycle and, in particular, the reinvigoration of consumer activity.
Companies have continued to work on increasing wages, including pay scale increases, and in the past four years, have kept up wage rises within the 2% range or more than ¥7,000 per month. Agreements on bonuses have also continued at high levels, and the fact is that wages are growing. However, consumption has not grown as much as expected. There is deep-rooted uncertainty among consumers about the future and about the national finances. This, along with the heavy burden of educational expenses, is leading consumers to put those increased wages towards savings instead of consumption. Increasing wages alone is not enough to realize a virtuous economic cycle. Along with wage rises, the uncertainty about the future among the citizens of Japan must be dispelled. In the business community as well, in addition to acting positively toward wage rises, we will also call on the government to make steady progress on social security reform and rebuild national finances as ways of dispelling that uncertainty about the future.
Request for Increased Corporate Contributions to Childcare Policy
On the major premise of a 10% increase in the consumption tax, from the perspectives of helping employees to remain in their jobs while balancing work and family, the business community will cooperate with the government's request for an increase in corporate contributions to childcare policy. However, the limit of such contributions should be set at ¥300 billion and the contributions made gradually in line with the state of development of childcare facilities.
Contributions of around ¥400 billion have already been made to this cause, and an additional ¥300 billion will bring the total to approximately ¥700 billion. This is a major burden on Japan's companies. Under these circumstances, we would ask the government to give further consideration to measures to alleviate that burden, such as lowering labor insurance premiums. We also call on the government to give consideration to ways to assist small and medium enterprises and very small businesses, to whom the burden of these contributions seems even greater, and to provide them with careful explanations about why they are needed.
The corporate effective tax rate, which in FY2014 was 34.62%, is now 29.97% and will fall even further to 29.74% next fiscal year. The effect of a cut in the effective tax rate of around 5% is tremendous. Having said that, with corporate tax cuts being contemplated in the United States and France, if Japan is to maintain its international competitiveness, further cuts in the effective tax rate will be vital. Efforts are also needed to make Japan's business environment attractive and comparable to those of other countries. Keidanren has consistently called for the effective tax rate to be lowered to the OECD average of around 25%. This is the crux of our corporate tax reform policy and we will continue to fly the flag of that policy. Because the corporate effective tax rate is imposed on total net income, if it were to be lowered to around 25%, it would have a major effect. In terms of how to fund such a tax cut, so far, the tax base has expanded to its limits under a revenue neutral policy. The only option left is to tax loss-making businesses, but there is resistance to such a notion. Various adjustments will likely be necessary, but we would like to propose a net reduction in taxation.
In this year's tax reforms, consideration is being given to establishing incentives for companies that are proactive in areas such as increasing wages and capital spending. While we do not know what kind of preconditions there would be for such incentives, lowering the effective tax rate to around 25% would be a major incentive for wage increases and the expansion of capital spending. It appears that consideration is being given to the recommendations I made at the Growth Strategy Council — Investing for the Future on November 17. We will be watching developments closely.
U.S. Corporate Tax Reform
In the United States, both the House of Representatives and the Senate have passed tax reform bills. While the details of the reforms differed between the House and the Senate, basically, they call for a cut in the corporate tax rate from 35% to 20% from 2018 under the House bill and from 2019 under the Senate bill. If this eventuates, Japanese companies operating in the United States will also receive benefit directly, so it is something to be welcomed. On the other hand, it will also affect the international competitiveness of Japanese companies. Until now, the United States has had the highest corporate effective tax rate among the industrial nations, followed by Japan. If the United States tax reform bill comes to fruition, Japan's corporate effective tax rate will be overwhelmingly higher than that of other nations. For this reason, the business community urges strongly for Japan's tax rate to be lowered to 25%.
For the next two days, the 3rd Japan-China Business Leader and Former High-Level Government Official Dialogue (Japan-China CEO Summit) will take place. With relations between Japan and China looking up, we look forward to a message of strong encouragement for Japan-China relations from Prime Minister Abe. During the recent visit to China by a joint delegation of Japanese business associations as well, we also received strong messages from the Chinese side for the promotion of economic and industrial cooperation between our two countries. We will continue to deepen our discussions with the top levels of the Chinese business community about strengthening private-sector exchanges, promoting innovation, and global cooperation, including the One Belt One Road initiative.