Toward a Full Recovery of our Economy

Takashi Imai Chairman, Keidanren

Declaring revival of our economy as its foremost priority, the government led by Prime Minister Keizo Obuchi since last autumn has rapidly taken measures to stabilize the nation's financial system. It has also put in place an emergency economic package and other measures seeking to boost domestic economy from the demand side. Various economic indicators show that the Japanese economy, as a result, seems to have passed the worst phase of recession and have been stabilizing. But what matters is whether the economy will move on from here to a full recovery driven by the private sector. This is of decisive importance to the prospects for the revival and revitalization of the nation's economy.

The fact is that there exists a supply-demand gap estimated to reach 30 trillion Yen or more in macro-economic terms, while the position of government finance has deteriorated to a dangerous point. In such circumstances, repeating any more shots-in-the-arm in the form of fiscal spending to boost aggregate demand while leaving the crisis of public finance unattended would be too questionable.

Rather, we need to reform the supply structure radically and as swiftly as possible to restore the competitiveness of industry, while continuing with a careful macro-economic management. For their part, the private sector must tackle the so-called three excesses--those of capacity, employment and debt at it own initiative and without delay.

Obviously, the excess capacity problem is one that should be addressed by private businesses according to the principles of "independence, self-help and self-responsibility." What the government is asked to do is to help facilitate industry's effort, for example, by making necessary revisions in the Commercial Code and taxation laws as well as improvements in the safety net for employment and other matters. The reform of the supply structure will move ahead only when the government and the private sector accept and perform their proper roles and responsibilities.

If Japan is to enhance the competitiveness of its industry, it will have to do more than changing the high-cost supply structure and revitalizing the existing industries. Most important is to encourage the growth of new businesses and industries and find those capable of leading Japan's industrial future. This is to be done through more deregulation and development of strategic technologies for tomorrow. Seeing that such structural reforms for the short- and longer-term will go forward without interruption would make it possible to bring about a full recovery driven by the private sector, preparing the way for Japan's economic growth of the next century.