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

May 20, 2019

Quarterly Estimates of GDP for January-March 2019

The latest GDP estimates reflected regular business activity and indicated no major changes, recognizing that the Japanese economy continues its solid recovery. Capital expenditure varies among industries, but the country as a whole shows no negative signs. Many executives intend to build innovative business models aimed at digital transformation, and appear to have a healthy appetite for investment to this end.

Discussion with Keidanren member executives has clearly indicated to me that, while being aware of concerns such as uncertainty in foreign relations, they are eagerly considering ways of taking their businesses forward to the next phase.

Consumption Tax Rise

Various commentators have suggested that the consumption tax rise should be suspended. However, we believe it should proceed as planned, not least to foster a shared sense of urgency concerning the current fiscal situation. Keidanren has no intention of changing its views on this matter.

Minimum Wage Rises

I understand that Japan's minimum wage is low compared to other countries, and I am not opposed to increasing it gradually. However, many Keidanren member companies believe there is a limit to the annual rises of 3% or more that have occurred over the past three years. Increasing the minimum wage does not necessarily lead to economic recovery, and the purpose of such rises should be carefully discussed. From a business perspective, I believe that the minimum wage should not affect management decisions.

Convenience Store Food Disposal

Deciding whether to drop prices on convenience store food nearing its expiry date, rather than simply discarding it, is a matter for each store's sales strategy. The issue of food disposal rates affects not just the Japanese convenience store sector, but the entire global food industry. Reducing food waste is a worldwide trend and a global challenge.

Addition of Huawei to US Export Control List

The US-China struggle for 5G supremacy is prompting unprecedented steps to defend technology. Countries are likely to take different approaches to building 5G networks, depending on factors such as their own infrastructure development. However, consumer services based on next-generation smartphones will continue to advance, and businesses will probably become entangled in conflicts between national strategies.

Stronger US Controls on Sensitive Technologies

In August 2018 the US passed a National Defense Authorization Act incorporating stronger regulatory controls on inward investment affecting national security and exports relating to sensitive technologies. It contained the Export Control Reform Act (ECRA) and the Foreign Investment Risk Review Modernization Act (FIRRMA). Detailed rules for screening inward investment and stricter export regulations are currently under discussion in the US. We need to monitor what impact such moves to strengthen controls on sensitive technologies will have on Japanese companies' supply chains and the Japanese economy. We also need to consider how Japanese enterprises should respond. As part of these efforts, I visited the US during the recent long holiday in Japan.

Export controls were previously determined within a multilateral framework called the Wassenaar Arrangement, but the current moves are decided solely by the US government. During my US visit, I discussed these regulations with top officials from the Department of the Treasury and Department of Commerce, which are responsible for them. They were expecting to hear the views of the Japanese business community, so Keidanren will continue to provide timely and appropriate input.

While in the US, I also exchanged views with both Republican and Democrat members of Congress. I got the impression that both sides have a sense of crisis over China that goes beyond the trade imbalance. This reaffirmed the importance of continually communicating Japanese business opinion to the US.

Executives' Comments