- Future Design 2040
- The Situation in South Korea
- The Next NDC
- The Minimum Wage
- Wage Hikes by SMEs
- Political Funding
Future Design 2040
As we have finished putting together "Future Design 2040," our medium-to-long-term vision for Japan around the year 2040, let me take this opportunity to present it here today.
Japan currently faces two challenges that should be overcome. First, it is a nation with a declining birthrate, an aging society, and a shrinking population. Second, it is an archipelago nation with a dearth of natural resources. Future Design 2040 proposes initiatives aimed at addressing these circumstances and transforming our nation into a society capable of sustaining a favorable cycle of economic growth with an equitable distribution of wealth by the year 2040. The vision it portrays of this future society is one of a Japan able to achieve a national standard of living that sustains the hopes and dreams of our future generations.
It envisions our economy and industry as those of a leading nation in the fields of science, technology, trade, and investment, all established on the foundations of a fair, equitable, and sustainable society.
Future Design 2040 recommends initiatives in six domains as essential for the achievement of this future vision: social security for all generations; the environment and energy; regional economy and society; new value creation through innovation; education, research, and labor; and economic diplomacy. Additionally, it offers future prospects for measures in macroeconomic management that will provide foundation for these initiatives.
Because they are so intimately intertwined with the challenges they address, these initiatives will require implementation with total optimization in mind from the vantage point of social value.
Sustaining a favorable cycle of economic growth with a more equitable distribution of wealth will demand efforts to create and expand a cycle of consumer spending driven by investments and wage increases. To that end, steps backed by a total optimization perspective must be taken to expand domestic investment through macroeconomic policy-driven gains in economic growth potential; dispel consumer anxiety over the future through integrated efforts in tax and social security reform; and facilitate smoother labor mobility and work-style reform.
Additionally, stable supplies of energy will be a must for any expansion in domestic investment. It will be essential to pursue the utilization of nuclear power generation and other forms of nuclear energy from a medium- and long-term perspective.
Strengthening this nation's prowess in the spheres of science and technology will also be a must. Future Design 2040 underlines the importance of boosting the research abilities of our top universities and developing an improved research climate for the research community by doubling public subsidies for scientific research and expanding the scope of public funding for national university operations.
For regional revitalization, Future Design 2040 advocates the creation of virtual "doshu" territories and a "new doshu territorial concept" where each territory exploits local strengths and revitalizes the territory through friendly competition.
Our hope is that the details presented in Future Design 2040 will serve as a starting point for deeper discussions over the national vision that Japan should aspire to from a medium- and long-term perspective.
(In response to a question about integrated tax and social security reform) In our world today, social disparities have become entrenched. They are widening and being reproduced, and the social divisions are becoming more pronounced. As there will be no growth without an appropriate sharing or balancing of wealth, Keidanren has been advocating a virtuous cycle of growth with the equitable distribution of income. On that latter point, we need to go a step further than pure wage increases. Pursuing integrated measures in tax and social security reform will also be key.
In the context of systemic reform, first, it will be imperative to show the future outlook for social security benefits and burdens as soon as possible. Then, based on the outlook, we must take action to overcome the current reality, which has been marked by a decline in the propensity to consume among younger generations doubtful about the sustainability of the present system of social security.
The system in place now was built on the assumption that women in households would be full-time homemakers. In pursuing measures in reform, it will be necessary to devise a system that is neutral with respect to patterns or styles of work. Given that the current system is no longer able to foot the cost of social insurance benefits with income from premiums alone, the balance has been covered by other sources, including consumption tax revenue and proceeds from the issuance of government bonds. As such, it embodies a fiscal issue.
The questions revolving around social insurance combine several major issues, including the generational divide stemming from the burden of increased social insurance premiums and the growth in Japan's fiscal deficit. Although integrated tax and social security reform constitutes a task that will require some time to achieve, we want the government to show resolve and address it head-on.
(In response to a question regarding measures to strengthen the creative content industry) In 2022, Keidanren inaugurated a Committee on the Creative Economy that has devoted its energies to studying this issue. In terms of scale, exports of creative content originated in Japan have surpassed exports by the petrochemical industry and reached a level commensurate with that of the steel industry. This is arguably a field where Japan can demonstrate its strengths.
Efforts in infrastructure development will be essential in providing stimulus to Japan's creative content industry and disseminating original Japanese content worldwide. Creators and other human talent will count as the most important elements in that context. Cultivating such resources and developing an environment where they can thrive will be indispensable. Additionally, harnessing digital technologies for content creation will also be an important challenge in terms of strengthening Japan's position in this field overseas.
Many inbound visitors are now coming to Japan to take advantage of the current cheap yen. I would like to see that trend exploited as an opportunity to bring more foreign nationals in contact with Japanese creative content and help expand its appeal.
(In response to a question about the education of global leaders) If we are to cultivate human resources with the ability to reason and express themselves with a sense of leadership, then I think we will need to revise the "operating system (OS)" for their education. What is needed is a form of education that allows for the sustained refinement of leadership qualities, not something that places undue emphasis on educational ranking.
Moreover, it will be difficult to limit this framework for leadership education to studies within Japan alone. Currently, by international standards, the number of Japanese students abroad on foreign exchange programs seems extremely small. While the cost of foreign exchange studies by all high school, university, and graduate students with an interest in that experience is estimated to be around one trillion yen in scale, providing young people with financial assistance for overseas study is extremely important.
(In response to a question seeking the Chairman's thoughts on his successor) Although I want my successor to be someone who shares my basic views on Future Design 2040, I realize this vision may eventually become outdated. The thing that matters is that they represent Keidanren with a broad-based societal perspective and show sound reasoning in their arguments. That is the posture I want the next chairman to follow.
The Situation in South Korea
(In response to a question about the current political turmoil in South Korea) Ties between Japan and South Korea have improved significantly under President Yoon, and trilateral coordination and cooperation between Japan, the US, and South Korea have also shown headway. Next year will mark the 60th anniversary of the normalization of diplomatic relations between Japan and South Korea. Given expectations for closer cooperation and coordination, the recent political turmoil in South Korea is a serious concern. We are not aware of any impact on South Korea's economic relations with Japan at this point, and South Korea is an important neighbor with whom Japan should not only have good economic relations, but also closely cooperate in the spheres of politics, diplomacy, and security. We thus plan to follow developments there with keen interest.
(In response to a question about the future impact on the Japanese economy) We cannot rule out an impact. Take the semiconductor industry, for example. Japan exports semiconductor materials and processing machinery to South Korea, which in turn exports finished semiconductor products to Japan and other countries worldwide. Political turmoil in South Korea could have a global impact for at least one industry.
The Next NDC
(In response to a question about the 60% reduction in greenhouse gas emissions by 2035, relative to fiscal 2013 levels, that the Japanese government has proposed as part of its next Nationally Determined Contribution [next NDC]) As a linear pathway to carbon neutrality by 2050, the government's proposed target seems reasonable.
Japan has few locations suited for the siting of renewable energy-based power-generating facilities and will not be able to achieve carbon neutrality without the development and widespread implementation of innovative technologies. From a medium- and long-term perspective, it will be necessary to launch a national initiative for steady progress in R&D on new technologies and their deployment, including nuclear power.
The Minimum Wage
(In response to a question about the government's targeted increase in the national weighted-average minimum wage to at least 1,500 yen by the end of the 2020s) It is a fact that Japan's minimum wage is low by international standards, and all parties concerned share the view that it needs to be raised as soon as possible. However, the minimum wage is set by law and applies to all companies under provisions of the Minimum Wage Act, with stiff penalties meted out for violations. Therefore, it is imperative that the government set a target that can be achieved with reasonable effort and create a climate that enables companies to meet it.
To meet the 1,500 yen target by the mid-2030s, as initially proposed by the Kishida administration, the minimum wage would have to be increased by around 4% every year. The idea was to have the corporate sector meet this target over the medium and longer term, factoring in consumer price inflation of around 2% coupled with gains in productivity. However, if the goal is to be met by the end of the 2020s, the annual increase would need to be over 7%, and if it were to be met within the next three years, we would need annual increases above 12%, which would be commensurate with drastic measures.
Wage Hikes by SMEs
(In response to a question about wage increases by SMEs) It is important that we strive to expand the number of companies participating in the Declaration of Partnership Building initiative and boost its effectiveness. Moreover, as a social norm that echoes the value-added in quality goods and services, we need to foster broader awareness of the importance of proper price pass-through, including labor costs, not only in transactions between large firms and SMEs, but also those between SMEs themselves and between SMEs and consumers. To that end, it will be necessary for the public and private sectors to work together and devote enough time to this issue.
Political Funding
(In response to a question about the suitability of political donations from companies and business organizations) Keidanren does not subscribe to the notion that private donations from individuals are all good and those from companies and business organizations are all bad.
However, it is crucial that political funding be transparent and in compliance with accepted rules. Furthermore, the debate around this issue needs to dig more deeply into the question of why politics carries certain costs. As the Diet moves forward with revisions to the Political Funds Control Act, we look forward to seeing it engage in an exhaustive debate.