- Consumption Tax Increase
- Spring Labor-Management Dialogue
- Bank of Japan Tankan (Short-Term Economic Survey)
- Monetary Policy
- Japan-China Relations
- Security Legislation
Consumption Tax Increase
Keidanren considers that the consumption tax rate should be raised again to 10% in April 2017 as scheduled in order to improve social security and restore sound public finances, and has consistently expressed this view. The consumption tax increase needs to be handled in a way that prevents economic depression. In particular, consumption has not recovered from the reactionary decline that followed a last-minute rise in demand caused by the consumption tax increase two years ago and remains flat at around 300 trillion yen a year. There are concerns that this scenario could be repeated next April. This situation must be avoided by all means. The government should boost consumption to an upward trend and must create an environment conducive to a consumption tax increase.
There are three main reasons for this sluggish consumption. Firstly, although wages have increased, growth in real income has been insufficient due to the previous consumption tax increase. Secondly, people are uncertain about the future, and spending is not on the rise, especially among younger generations. Anxiety about social security causes people to save money for the future rather than consuming. Thirdly, attractive products and services that strongly stimulate demand are not being offered in sufficient quantity.
Considering each of these causes in turn, wage rises including pay scale increases for the third consecutive year are going to be achieved through this year's labor-management dialogue. Wage increases at small and medium-size enterprises will exceed those at major companies, and employment conditions of non-regular employees will also improve. To address the second point of future uncertainty, the sustainability of social security urgently needs to be enhanced. This policy challenge has much to do with the consumption tax increase, and it is necessary for the government to eliminate the uncertainty that people have about the adequacy of the social security system. The third task of providing products and services to encourage consumption is the responsibility of companies, and the business community is devoting serious thought to this challenge.
Promotion of domestic tourism has the potential to stimulate consumption. Over the last decade the domestic tourism market has shrunk from 27 trillion yen to 19 trillion yen. It is therefore important to showcase the appeal of tourism and create an environment for its promotion. As part of these efforts, Keidanren is urging its members to encourage employees to use annual leave and proposing that government allows greater flexibility in the setting of school holidays and stimulates demand through travel vouchers.
Spring Labor-Management Dialogue
The report by the Keidanren Committee on Management and Labour Policy encouraged companies with improving business performance to positively consider wage increases on an annual income basis. We believe that, in general, companies have responded to this Keidanren stance in this year's labor-management dialogue. Although the amounts of increases will be smaller than in the last two years, pay scales will have risen for three consecutive years starting in 2014, and this is crucial considering that there were no pay scale increases for five consecutive years from 2009 to 2013. Cumulative pay scale increases over three years are expected to have positive effects.
On an annual income basis including bonuses, some companies have achieved wage increases exceeding 3%. Moreover, working conditions have been improved in a variety of ways: companies are changing non-regular workers to permanent employment status, offering better provisions for non-regular workers, providing effective wage increases through shorter working hours, and creating worker-friendly environments through measures such as working at home. Amid uncertain economic prospects, we believe that companies have done as much as they can.
Small and medium-size enterprises have also responded with serious efforts, although they face a tough and uncertain business environment. Initial JTUC Rengo statistics reveal quite high wage increases, amounting to 2.08% overall and 2.07% for SMEs with fewer than 300 employees. All companies, including SMEs, are seriously addressing the issue of wage increases.
The most important issue facing Japan is ensuring a strong virtuous economic cycle where wages increase, consumption rises, and corporate performance expands. This requires sustainable wage increases, and three consecutive years of wage increases will be a powerful driving force for the creation of a favorable economic cycle. It is important to continue creating an environment where companies can increase wages in a sustainable manner.
Bank of Japan Tankan (Short-Term Economic Survey)
Japan's economic fundamentals are solid. Although market trends toward falling share prices and yen appreciation since the beginning of the year and concerns over slowdowns in emerging economies are causing ongoing deterioration in business sentiment, no major negative factors have arisen. Fiscal 2015 capital investment has been revised downward slightly, but remains at a high level.
Monetary Policy
Three years have passed since the Bank of Japan began a new dimension in monetary easing, and overall we evaluate its policies as having had a stimulatory effect on the economy. In particular, drastic rectification of exchange rates has had a significant impact. The huge shift in the dollar rate from 80 yen to 110 yen makes it feel like we are living in a different world. Also, the Nikkei average, which was around 9,000, now remains around 16,000 despite having fallen recently. The Bank of Japan's monetary policy is having a major effect in revitalizing the Japanese economy, and should be deemed justifiable. Although there have been delays in achieving targeted commodity price increases, these are mainly due to the decline in crude oil prices, and we need to recognise that commodity price increases are difficult in this environment. Achievement of commodity price increase targets is likely to be postponed, but we expect that the Bank of Japan will continue to work towards achieving this goal.
Although steady progress is being made towards ending deflation and revitalizing the economy, we have not yet reached the stage of discussing an exit strategy for monetary policy. Bank of Japan Governor Haruhiko Kuroda is devising a range of measures, and the Bank of Japan still has an important role to play. Monetary policy for ending deflation and revitalizing the economy remains crucial.
Japan-China Relations
Japan and China are essential partners for one another, with close relations in many fields including politics, economics, and culture. Approximately 20,000 Japanese companies operate in China, creating nearly 10,000,000 jobs and making a large contribution to China's GDP.
However, volumes of investment and trade between Japan and China have reduced over the past few years. Stagnation in political and diplomatic relations lies behind this decline, and presents a major obstacle to the building of stronger relationships. In meetings with political leaders in China, the business community has continually noted that improved bilateral political and diplomatic relations are essential to strengthening and expanding economic relations between Japan and China. Partly due to such efforts, relations have gradually improved since last year. Keidanren is continuing to actively pursue economic exchange activities with China this year.
Security Legislation
Protecting people's lives and property is a crucial responsibility of government, and it is important that the security laws passed last year are carried smoothly into effect. The legislation was passed and implemented without necessarily having gained the full understanding of the public, but partly as a result of recent international circumstances, public understanding is gradually increasing. We hope that the government will continue to provide clear and judicious explanations to gain the understanding of the public.
We understand that the recent legal amendments were the most extensive revisions that could be made within the framework of the constitution, and believe that the government is providing the public with considerable security amid bewildering changes in the international situation.