Japan is under pressure from globalization, from a low birth rate and rapid population aging, and from obsolescence of the systems that have thus far underpinned the nation's economic development, to carry out radical reform of its whole socioeconomic system.
Japanese corporations must act on their own initiative, in a spirit of self-reliance, self-help and responsibility, to promote continual reform towards improved managerial efficiency and, in so doing, to break out from the perceived confines of today's society and establish a new platform for future growth. The nation's economic and financial community has consequently been quick to welcome the new Cabinet's plans for structural reform with no sacred cows, and hopes the plans will be steadily implemented in the coming period.
We must make a determined effort to achieve the reforms detailed below and to create a firm foundation for the development of socioeconomic structures for the 21st century. This is, moreover, a duty that Japan owes the world economy.
To create a comprehensive economic body with the power both to propose and to bring about policy initiatives for the new century, Keidanren will merge its operations with those of the Japan Federation of Employers' Associations (Nikkeiren). The formation of this new body is indicative of our determination to adopt a bolder approach than in the past to the range of problems Japan faces today and to resolve them quickly and resolutely.
Corporations must resolve to tackle problems such as those of bad debt and excessive indebtedness, and to put their business activities on a sounder managerial and financial footing. They must also do all in their power to rationalize and renew their organizational structures in such a way as to enhance their profitability and ensure that they have the ability to compete in an international arena.
The government must take steps, such as establishing a proper tax system for earnings on securities, to revitalize the capital markets and encourage direct financing. There is also an urgent need to review the system of class action on the part of shareholders, to introduce a consolidated system of taxation, and to take such other action as may be required to establish new legal, tax, and related systems more closely conformed to internationally accepted standards. It is also important that we should implement employment policy measures flexibly in response to changes in the employment situation.
Corporations must develop new technology and leverage IT to enhance productivity and strengthen their ability to compete while at the same time creating new industries and enterprises.
Given the role played by technology innovation in fueling economic development, there is a particularly pressing need for closer cooperative relations between industry, academia, and government in order to encourage more research and development, and for reform of the universities. Under the leadership of the Cabinet Office's Council for Science and Technology Policy, the government must implement a strategic and comprehensive program of science and technology policy measures and press ahead with national projects in advanced technological fields.
The government must also strive to make Japan a world leader in the field of IT. Furthermore, with a view to renewing Japan's urban environment, it must take steps such as creating social capital of a sort that will be conducive to improvement of the business environment in Japan's large conurbations, and implementing an exhaustive review of the land and housing-related tax system with a view to promoting a more active market in land.
There is also an urgent need for the education reforms currently being promoted by the government to be put in place at the earliest possible moment in order to bring Japan's education system more closely in tune with the changing times.
Corporations must not only continue to implement voluntary action plans designed to combat global warming but also take active responsibility for matters such as the development of innovative environmental technologies, the creation of recycle-based society socioeconomic structures, and the promotion of projects for the protection of nature. The government must take steps to combat global warming that will facilitate the accomplishment of both economic growth and environmental protection while at the same time taking the initiative in seeking the early establishment of a multinational framework within which this might be achieved.
The public and private sectors must also work together to secure a stable supply of energy by, for example, seeking over time to establish an economically sound and environmentally acceptable nuclear power industry.
To dispel public unease about the future, the government must take urgent steps to formulate a comprehensive plan encompassing measures for reform of the structure of public expenditure including the social security system, local government finances and public works, and the tax system.
In the case of social security, the government must take immediate steps not only to reform the health care system, including systems for the care of old people, but also to reform the pension system. In the case of local government finances, the government must review the separate roles of national and local government and the allocation of tax-based sources of funds, and either restrict or eliminate the role of local grant tax. At the same time, the government must also press ahead with the amalgamation of smaller local authorities and, in so doing, prepare the way for the devolution of power from the center. In the case of public works, the government must prioritize projects that will contribute, for example, to correction of the economy's high cost structure while at the same time ensuring that they are managed and implemented more efficiently.
Further administrative reform is essential if we are to create a system for the 21st century that is fueled by the energy and creativeness of the private sector. In addition to working to reform central government, the government must also review fundamentally the nation's public corporations, including public sector financial corporations, and abolish, integrate, or privatize them as necessary at the earliest possible moment.
The Cabinet Office's Council for Regulatory Reform must also press ahead with further regulatory and systemic reform with a view to reforming the underlying socioeconomic structure.
To create closer economic relations with the nations of Asia, North America, and Europe, the government must take the initiative in getting a new round of comprehensive WTO negotiations under way while at the same time pressing ahead with the conclusion of bilateral free trade agreements. Members of Japan's business community must also take steps to strengthen their ties with the government and other interested parties to ensure that their position is adequately reflected in trade negotiations.
The public and private sectors must work together to support the strengthening of Asia's industrial base in areas such as the development of human resources, basic industries, IT, and the like. At the same time, they must also seek to promote more widespread use of the yen and, in so doing, contribute to the stabilization of currencies and exchange rates.