• Economic situation
• Spring labor-management wage talks
• Funding source for childrearing support
• Japan-China relations
• Japan-South Korea currency swap pact

Economic situation

Stock market prices have been sagging since the turn of the year. We think there are the following three external factors behind the market slump: concerns over China's economic slowdown, the uncertain Middle East situation, and North Korea's nuclear bomb test. In this age of economic globalization well under way and major cross-border flows of investment money, it is inevitable for overseas developments to affect the Japanese stock market. However, we view the current stock market condition as an overreaction as a whole. In the medium to long term, Japan's economic fundamentals are strong and Japanese corporate earnings performance is in good shape.

The Chinese economy will not be a major risk factor. It is not weak at all. Although China's manufacturing purchasing managers index (PMI) has fallen below 50, the nonmanufacturing sector accounts for more than half the country's gross domestic product (GDP) and the nonmanufacturing PMI stays above 50. Even if economic activity goes up and down, it is not in a situation regarded as uncertain. On the Middle East front, its present situation does not warrant optimism but it will settle down in the long run as the United States and Russia are poised to step in as mediators.

As for plunging crude oil prices, they constitute both favorable and negative factors depending on industries and their business conditions. For Japan as a whole, we find lower crude prices more as a plus factor than on the minus side because they will help boost the competitiveness of companies by reducing raw material costs and encourage consumer spending.

The above three external factors have happened to combine with one another to the detriment of the stock market soon after the new year began. But this is a completely excessive reaction and the Japanese economy's fundamental strength has not been eroded. Once the market recovers calmness, it will eventually end up steadying at a level where it should. Japanese stock prices will be evaluated in a proper manner, bounce back to the 20,000-point level on the Nikkei index and can be expected to rise even further. We believe this sort of picture is the Japanese economy's genuine strength.

Spring labor-management wage talks

Wages and salaries reflect not just basic pay-scale increase but also the total of annual wage increase, various allowances, bonuses, labor conditions, etc. Through the Committee on Management and Labor Policy, Keidanren will call on companies enjoying better earnings to consider, in a proactive and depthful manner, a wage increase in excess of last year's results on an annual income basis. It is a recommendable choice to consider allocating bigger slices of the pie to young workers and childrearing employees instead of across-the-board pay raises. We have pointed out in this connection that it is important to motivate young employees and childrearing workers through better treatment with a view to coping with our society with a shrinking population. In addition, we will urge member companies to consider improving the work-life balance by taking such measures as a review of family and housing allowances, employment of non-regular workers as permanent staff and their wage increase, and correction of long working hours.

Although the stock market has been on the decline since the start of the year, the spring round of labor-management wage negotiations is an occasion for sincere and calm arguments. Barring unexpected developments, we don't think the current stock market trend will directly affect the wage talks.

Funding source for childrearing support

By the nature of things, support for childrearing families is something to be financed by government funding. But realizing the "dynamic engagement of all citizens" as sought by the government is an important policy issue. Therefore, the business community is to cooperate for the purpose under certain conditions. In this connection, we are considering expanding the current system of monetary contributions to childrearing support. Specifically, we will assist childrearing support activities involving businesses, such as the establishment of childcare facilities inside company offices, within an allowable limit. Such assistance will be limited to three years for the present. How to do thereafter will be decided through consultations between the government and business community.

Japan-China relations

Since assuming Keidanren's chairmanship, I have joined the Japan-China Economic Association's mission to Beijing twice and each time made strong appeals to Chinese political leaders that stable and favorable political and diplomatic relations between the two countries are indispensable for bilateral economic expansion. Thanks partly to this effort, political and diplomatic ties between Japan and China have considerably improved, as shown in the holding of bilateral summit talks and other favorable developments. We expect the Japanese political leadership to continue efforts for improved relations with China, and the business community would like to throw its support behind such efforts to help to make bilateral ties favorable from its own perspective. Specifically, we are scheduled to dispatch a joint mission of the Japan-China Economic Association, Keidanren, and the Japan Chamber of Commerce and Industry to China this fall, as we did last year, and hold in Beijing this year "a dialogue between entrepreneurs and former government officials from Japan and China," which was held in Tokyo last November. We expect to continue such efforts as an important challenge, including action urging the governments of the two countries to further strengthen bilateral political and diplomatic relations through the expansion of economic exchanges.

The Chinese side has requested cooperation in the environmental sector. On our part, Keidanren will seek to resume in Beijing, possibly next year, the "Japan-China Green Expo" that has been suspended since it was last held in 2011, and use the occasion to showcase state-of-the-art environmental technologies possessed by Japanese companies. And we hear that the Japan-China Economic Association is scheduled to host the "Japan-China Energy Conservation Forum" this year following the one held last November, which was given high marks. The Chinese side has shown stronger interest than ever before in this sector, and our response to environmental issues will go a long way toward laying the groundwork for Japan-China relations.

Japan-South Korea currency swap pact

Japan and South Korea chose not to extend their currency swap agreement in February last year on the basis of the prevailing bilateral political situation then. Now, however, we believe the Korean side feels the need to have a mechanism in place for an enhanced currency safety net, including the resumption of a currency swap pact with Japan, amid concerns over the impact of the latest U.S. interest rate hike on the Korean economy. We presume that Japan and Korea will address the matter in a proper manner from now on within the framework of dialogue between their finance ministers.