- Replacement of Nuclear Power Plants
- Monetary Policy
- Consumption Tax Cut
- Economic Outlook
- Meeting of the Chairman and Vice Chairs
- SoftBank Group
- Constitutional Revision
Replacement of Nuclear Power Plants
(In response to a request for an assessment of the government setting out a concrete outlook for the replacement of nuclear power plants in its draft revision of the Future Nuclear Energy Policy Direction and Action Guidelines) The government has for the first time presented a timeline-based outlook for the nuclear power plant capacity and number of units that will be required, and we in the business community wholeheartedly welcome this. It is also in line with what Keidanren has long advocated.
The construction and operation of nuclear power plants is a business model that requires enormous investment, recouped over a long period. It is highly significant that the government has set out this outlook: doing so will enhance predictability for operators, support the recruitment and development of human resources, facilitate the passing down of technology, and promote the concentration of supply chains, all of which carry particular weight in advancing nuclear energy projects.
If replacement and similar steps are not taken, nuclear power plant capacity will decline precipitously from the 2040s onward. With lead times of as long as 20 years from the decision to build to the start of operation, the replacement of nuclear power plants simply cannot wait.
With ensuring safety and gaining the understanding of local communities as absolute prerequisites, we hope the government will press ahead with improving the business environment, including further enhancing predictability and improving conditions for financing. In addition, since the proposed outlook is based on current assumptions, it is important that it be reviewed on an ongoing basis in light of future changes in circumstances.
Monetary Policy
(In response to a question about whether conditions are right for raising the policy interest rate at the next Bank of Japan (BOJ) Monetary Policy Meeting) Given the highly unstable international situation, domestic price trends, and the trajectory of wage increases in the spring labor-management negotiations, among other factors, the BOJ will likely engage in careful dialogue with the markets. The view that a rate hike is coming has been gaining ground, but decisions on the policy rate are, as we understand it, for the BOJ to make in a timely and appropriate manner. With the situation in the Middle East gradually entering a protracted phase, concerns about the outlook are mounting, and we believe judging the risk of rising prices is extremely difficult at this juncture.
(In response to a further question about what specifically is making the BOJ's judgment difficult) The biggest question is how widely, and to what degree, rising energy prices will ripple through the economy. With upstream manufacturers already implementing corresponding price increases, it is extremely difficult to read how far the effects will spread to people's daily lives and to corporate procurement and sales, including, for example, food packaging. While we have no choice but to factor in the risk of a major impact, it is also conceivable that consumption and investment will hold up without declining much in the face of price pass-through and will continue on a firm footing. We are now at that crossroads, and this is a difficult juncture in which to steer monetary policy.
(In response to a question suggesting that the markets have already priced in a rate hike and that a decision not to raise rates would itself come as a surprise) It is said that the markets have already priced in a rate hike, and I do think BOJ Governor Ueda's recent communications have differed somewhat from his previous messaging. The decision on whether to raise rates will likely come down to how the BOJ views inflation. We expect the BOJ to make an appropriate judgment after considering a range of scenarios, including how the markets might react differently in the event of a surprise.
Consumption Tax Cut
(In response to a question about what discussions took place at today's Keidanren's meeting of the Chairman and Vice Chairs regarding the National Council on Social Security) We shared information in very broad terms on the discussions surrounding a consumption tax cut, including media reports on the proposal to lower the consumption tax on food to 1 percent, and on the state of discussions on the introduction of refundable tax credits.
(In response to a question about views on the proposal to cut the consumption tax to 1 percent) Given that the consumption tax has long been positioned as an important and stable source of revenue underpinning the social security system, our stance is that clearly identifying alternative revenue sources is a fundamental precondition for ensuring the sustainability of the social security system and maintaining market confidence. That stance would not change even if the cut were to come down to 1 percent rather than 0 percent. The extent to which a reduction to 1 percent would actually ease the practical burden needs to be examined with full regard for the views of the parties concerned, and it is important that the National Council on Social Security continues to discuss and examines this thoroughly, along with the other factors that must be taken into account.
(In response to a question about views on the consumption tax cut on food being limited to two years) Our understanding is that the consumption tax cut is being considered as a kind of time-limited measure, a bridge until refundable tax credits are institutionalized. In the interests of ensuring the sustainability of the social security system and maintaining market confidence, if a tax cut is to be implemented at all, we would like it to be limited to two years. The two-year limit has been stated explicitly as a matter of political judgment, and we would like that commitment to be upheld.
(In response to a question about reports that the government is considering support for the food service industry, agriculture, and other sectors to coincide with the implementation of the consumption tax cut on food) We are aware of the reports, but the details have yet to be finalized, and since this is a matter that will continue to be discussed at the National Council on Social Security, we would prefer to refrain from commenting.
(In response to a question about views on desirable alternative revenue sources for a consumption tax cut) How the alternative revenue sources are structured will also be important to ensuring the sustainability of the social security system and maintaining market confidence. If a tax cut is to be implemented, the perspectives of fair and equitable burden-sharing across society as a whole, and of realizing the strong economy championed by the Takaichi administration and the investment-driven economy that Keidanren advocates, will also be necessary. That said, we would prefer not to prejudge the specifics of how the revenue sources should be structured.
Nonetheless, continuous expenditure reform is important, and those efforts must not be neglected. With the range of demands on public finances set to expand going forward, keeping the burden as light as possible also matters, and expenditure reform will remain important at all times.
Furthermore, a proposal to draw on tax revenues that have come in above projections has also been reported. Whether that would be appropriate in the context of a two-year temporary measure is something we believe requires thorough scrutiny from the perspective of maintaining market confidence.
(In response to the suggestion that, in securing alternative revenue sources, measures such as raising the top income tax rate or reviewing special taxation measures under the corporate tax could also be considered from the perspective of forming a robust middle class) What matters in forming a robust middle class is to build, through integrated reform of tax and social security, a social security system for all generations with moderate-welfare and moderate-burdens in which ability-based contributions are applied consistently. That is the central theme of the National Council on Social Security and should continue to be discussed.
The question of how income tax rates should be structured would also fall within the central themes of the National Council on Social Security. Whether it would be appropriate as an alternative revenue source for the current consumption tax cut, however, must be carefully examined.
As for the corporate tax, there is also the history of the FY2026 tax reform, in which revenue to offset the review of the provisional gasoline tax rate was secured through means including a review of special taxation measures. At the same time, amid the current movement toward a strong economy and an investment-driven economy through crisis-management and growth investment, we recognize that Japan's effective corporate tax rate is very high compared with other countries. We cannot support seeking further revenues from the corporate sector, from the perspectives of establishing an investment-driven economy and strengthening the international competitiveness of Japanese companies.
Economic Outlook
(In response to a question about the outlook for the Japanese economy) At present, corporate earnings are very strong, as the earnings announcements of many companies have once again confirmed. Our understanding is that the impact of heightened tensions in the Middle East had yet to appear in results through FY2025. The outlook for wage increases will likely grow somewhat less certain going forward, but at this stage real wage growth has been positive for four consecutive months.
The concern is the extent to which inflation will spread to companies' procurement of raw materials and to the daily necessities, food items, and other goods essential to people's lives. We must not lose sight of the risk of stagflation, including weakening demand caused by rising prices and defensive responses by companies on the employment front. The economy remains in an expansionary phase, but if risks were to materialize, it would likely be from autumn onward. In that sense, developments in July and August will be important in forecasting the trend for autumn and beyond.
Meeting of the Chairman and Vice Chairs
(In response to a question about whether, at the first meeting of the Chairman and Vice Chairs under the new leadership, the Chairman spoke about the direction of future activities) I set out the broad policy direction at the General Assembly on June 3 and did not address it today. That said, since the theme of the discussion was the key priorities for this fiscal year, the debate naturally proceeded with this fiscal year's business plan and my remarks at the General Assembly in mind. On the whole there were many highly constructive comments, and the six newly appointed Vice Chairs each expressed their renewed resolve, making for a very good session. Starting with today's meeting, we are also making a conscious effort to allow more time for free discussion, and a lively exchange of views took place.
(In response to a question about whether physical AI came up in the discussion) Many of the Vice Chairs spoke about the importance of AI in general, and I was the one who raised physical AI. I conveyed my view that the wall standing in the way of promoting an investment-driven economy is the constraint on labor supply, and said that one way to overcome that wall is to pursue the development and social implementation of physical AI.
SoftBank Group
(In response to a question about the view that SoftBank Group's market capitalization surpassing that of Toyota Motor symbolizes a transformation of Japan's industrial structure) As a global trend, particularly in the United States, active investment in AI and semiconductors is driving equity markets as a whole. Our understanding is that this momentum has spilled over into the Japanese stock market as well.
It is true that, as Japan's industrial structure has evolved from one centered on heavy industry to what it is today, the stock market has repeatedly seen particular industries surge and others slump. That said, it would be premature to conclude that the industrial structure has shifted based solely on the relative market capitalizations of these two companies at this point in time. Toyota Motor remains a global leader in the mobility field. We see this as a market movement symbolizing the surge of investment in AI and semiconductors.
Constitutional Revision
(In response to a question about Keidanren's plans to publish policy proposals on constitutional revision, given that LDP President Takaichi has expressed a strong determination to see the Diet formally propose constitutional amendments by next spring) The Constitution is, in my view, a truly fundamental document that defines what the nation should be. At the same time, since its enactment, circumstances at home and abroad have been in constant upheaval. Constitutional revision has remained an important theme for successive administrations over many years, and Keidanren believes there is significant value in thorough debate that transcends the ruling and opposition parties, and in putting forward issues for discussion aimed at fostering understanding among all segments of the public.
While LDP President Takaichi has expressed strong resolve, Keidanren has no plans at this point to issue policy proposals on constitutional revision. Deliberations and debate may well move forward in the Diet, and if they do, we intend to respond appropriately, while keeping a close eye on public opinion.
(In response to a question about whether constitutional revision came up at the recent luncheon with Prime Minister Takaichi) It did not.