Over the last four years since my appointment as Keidanren chairman in June 2014, I have conducted nearly 130 press conferences. This will be my last, and I am filled with mixed emotions: relief, the satisfaction of having achieved what I set out to do, and invigoration. Representatives of the media have accompanied me on this four-year journey, and I would like to thank you all once again.
In my press conferences, I have spoken frankly about the political and economic situation and outlined Keidanren’s initiatives and ideas on key policy issues, along with my own thoughts. I have always felt that the media play an enormous and crucial role in widely publicizing Keidanren’s activities and gaining people’s understanding. I believe Keidanren has built a tense yet trusting relationship with the media, and I hope this relationship of trust will continue.
Looking back to the economic and social situation when I was appointed as chairman, Japan’s GDP had not risen at all for 20 years. Over the same period, other economies had shot ahead, with GDP expanding by a factor of 2.6 in the US, 4.8 in South Korea, and 19 in China.
Smothered by a sense of helplessness, Japan could see no way ahead. It faced a raft of vital policy challenges to achieve fiscal reconstruction and reform social security systems. In particular, social security expenditure reached 120 trillion yen, exceeding the government’s budget, and is projected to rise to 150 trillion yen in 2025. I believed that such issues could not be ignored. Moreover, Keidanren’s presence had diminished and trust in our organization was wavering. Against this backdrop, I took office as Keidanren chairman with the intention of risking my neck, driven by a sense of crisis that if Japan were not built up again, it would be left behind by the international community.
In collaboration with the government, Keidanren is now tackling vital issues including ending deflation and revitalizing the economy and producing concrete results. Many Keidanren proposals have been reflected in the government’s growth strategy, “Public-Private Strategic Project 10.” The “Society 5.0” concept that Keidanren has advocated is a core element of that initiative, and the public and private sectors have successfully worked together to build systems for implementing growth strategy. Keidanren has proactively made policy proposals on structural reforms to the economy and society. The importance of social security reforms and fiscal reconstruction has permeated the public consciousness, and people share the government’s sense of urgency on these matters. Furthermore, lowering the effective corporate tax rate to 29.74% has made Japanese companies more internationally competitive. This has also had a positive impact in encouraging domestic and foreign companies to invest in Japan.
Turning to working style reform, without cooperation between government and the business community it would not have been possible to set upper limits on overtime hours with penalties for infringements. Great advances have also been made in facilitating active participation of women in the workforce. Thus, Keidanren has been able to play a leading role in promoting many structural reforms.
From 2000 to 2013, there were barely any pay scale increases, but in the belief that enterprises should act as a trigger to set off a virtuous economic cycle, Keidanren recommended extensive wage rises, including pay scale increases for five consecutive years, and this goal was achieved. The business community has a key role in maintaining and reinforcing momentum for wage rises while considering the wishes of society, and Keidanren has produced significant results on this front. As a result of the public and private sectors collaborating to promote growth strategy and address structural reforms, GDP has risen by more than 50 trillion yen.
Keidanren’s strenuous economic diplomacy efforts have resulted in the TPP 11 agreement and the Japan-EU EPA becoming realities. As the focus of Japan-US relations has shifted to trade issues under the Trump administration, Keidanren has dispatched eight business missions to 15 US states in addition to Washington, D.C. to carefully explain how Japanese companies contribute to economic development in the US and gain deeper understanding of their role. This has helped to strengthen economic relations between Japan and the US. At a time when Japan’s ties with China and South Korea have been strained, Keidanren has continuously urged political leaders to improve bilateral relations. Japan now enjoys a good relationship with both these countries, partly due to Keidanren’s strong support of closer ties.
Efforts to address the remaining issues of ending deflation and revitalizing the economy are now close to bearing fruit. I hope my successor, Mr. Nakanishi, will continue to tackle these challenges as priorities. In particular, the realization of Society 5.0 still lies ahead. At the same time, I hope that Keidanren will continue its efforts for fiscal reconstruction, social security reform, and economic diplomacy.
Working Style Reform
The bill on working style reform originally incorporated four elements: expanding discretionary working hours systems, establishing a new system for advanced professionals that values performance instead of hours worked, equal pay for equal work, and placing an upper limit on overtime. However, expanding the scope of discretionary working hours systems has now been excluded from the bill. Of the remaining three issues, discussion on revising the system for advanced professionals has resulted in inclusion of provisions enabling workers subject to the system to exclude themselves, and explicit mention of large companies’ obligation to strive to consider the needs of SMEs when making orders and setting delivery deadlines, so as to avoid imposing excessive work. I understand that both of these revisions are appropriate in advancing working style reforms. I hope that the relevant bill will swiftly be passed to accomplish the three reforms, including the system for advanced professionals.
The system for advanced professionals applies to highly specialized workers and differs entirely from the earlier white-collar exemption system. Keidanren set eligibility for the white-collar exemption system at annual incomes of four million yen and above. On the other hand, the income threshold for the system for advanced professionals is 10.75 million yen. The system for advanced professionals is completely different, and there are no thoughts of reducing the income requirement.
The Relationship between Business and Politics
Government, business, and the people must join forces to reinvigorate Japan. During my time as chairman, Prime Minister Abe has promoted Abenomics under the slogan of restoring a strong economy. In the belief that politics and business must work together to rebuild Japan, I positioned stronger partnership with politics as a priority. In normal times politics and business need to hold each other in check, but in a crisis, they must cooperate to address the key policy issues of ending deflation and revitalizing the economy. I have strived to communicate Keidanren’s mission and role throughout society. I feel that over the past four years society and the people have responded to this, and we have gained their understanding.
Of course, tension is a necessary element of every cooperative relationship. To assist politics in implementing policy, it is important to not merely criticize, but also take part in policy development and decision-making processes and propose and discuss policies. Based on this belief, I have participated as a representative of the business community in government forums including the Council on Economic and Fiscal Policy and the Council on Investments for the Future and made recommendations directly to Prime Minister Abe. The role of business is not to meekly accept government demands, but rather to propose policies to government and support implementation. Keidanren’s future relationship with politics will be decided by Mr. Nakanishi, but I hope he will continue to represent the business community in forums for determining key policies, make proactive recommendations, and actively disseminate the views of business.