I. Necessity to Promote New Country Creation with Concerted Efforts of All Japan
Japan's economy has been confronting a series of difficulties serious enough to be termed a national crisis. As a result of the "20 lost years" of deflation, the Lehman Shock and other problems, Japan's share of the world GDP began to shrink after reaching a peak of 18% in 1995. In 2009, its share fell to 8.7 %. Moreover, the damage inflicted by the Great East Japan Earthquake is far beyond our imagination, and is having tremendous impact on the values and attitudes of people in Japan.
What is required in politics today is, above all, to present a clear path for Japan to follow, in terms of how to achieve creative regeneration from the disaster and lead this country towards new development, how to regard the diplomatic relationship between Japan and the U.S. in the framework of global society, and what types of mutually beneficial relationships should be established between Japan and other countries in east Asia.
In other words, the new administration should clearly indicate "what country and society they will transform Japan into and how they will lead Japanese citizens," or in other words, "the form of the country that they are aiming for." To ensure that this will be achieved, we at the Kansai Economic Federation strongly urge the new administration to demonstrate leadership to unite the entire nation.
We call for Prime Minister Noda, who heads the new administration, to take the lead in this emergency situation, and to implement measures to promote "a new country creation" with firm determination, even if such measures might be painful to Japanese citizens. If he demonstrates his capability to implement such measures, Japanese citizens need to respond appropriately.
Japanese economic growth has been achieved by the development of industrial activities, especially manufacturing. We of the business community will continue to play our role in contributing to Japan's economic growth through industrial activities, serving as a financial source for the recovery and a key element to improving financial health. With global competition becoming increasingly fierce, Japan has been facing so-called "quintuple difficulties," including the unprecedented super-strong yen. To make matters worse, an urgent problem of power supply shortage has been added, resulting in "sextuple difficulties." Solving these problems, we would like to overcome these severe situations by supporting a new country creation based on the promotion of the Growth Strategy.
II. Measures to be Taken by the New Administration
At the inauguration of the new administration, the Kansai Economic Federation urges the administration to take the following major actions regarding issues to be dealt with strategically from the viewpoint of a long-term plan for the country.
1. Achieving Reconstruction and Recovery from the Great East Japan Earthquake
Prompt reconstruction and recovery efforts must be conducted. These efforts should not be deemed to be only for reconstruction and recovery. It is necessary to regard creative recovery as a growth strategy and to lead such recovery to new economic development of this country. Essential in this case is the viewpoint that compatibility must be ensured between improving financial health and securing funds necessary to steadily promote the recovery.
2. Implementing the Growth Strategy Steadily and Promptly
As the focal point of the Growth Strategy, it is necessary to position manufacturing as the engine for economic growth. To solve the so-called "sextuple difficulties," the first thing to do is to prioritize immediate problems, such as correction of the super-strong yen and solution of the power shortage, and to launch actions immediately to establish an environment where companies can demonstrate their fullest vigor and abilities in global competition.
3. Launching Measures Immediately to Improve Financial Health
To improve financial health, reform must be initiated immediately to realize a sustainable social security system that people can rely on. No delay is permissible in implementing concrete measures to improve income and expenditure, such as raising the consumption tax rate and curtailing social security costs.
4. Securing Stable Power Supply
A national energy policy is a critical issue affecting the nation's economic policy and all society. It is necessary to feature a comprehensive perspective with consideration given to the balance between the environment and economy, as well as to energy security and other issues, and to establish an energy policy based on Japan's situations and scientific views.
In this context, in order to realize recovery, economic growth, and financial health improvement, which we request the new administration to achieve, it is necessary to solve the current power supply shortage immediately. Stable power supply must be restored as soon as possible, by the resumption of operations of nuclear power plants that have passed periodic inspection. Under the responsibility of the government, the resumption must entail the understanding and agreement of local communities.
5. Establishing Active Diplomacy in Pursuit of National Benefits
Economic and security problems must be solved with the cooperation of the U.S. based on the strong alliance between Japan and the U.S. Moreover, it is necessary to make use of the vigor of Asia, including countries that are currently showing remarkable growth, such as China, India, and ASEAN countries, and to deepen cooperative relationships to ensure that Japan's economy will develop together with the Asian economy.
1. Achieving Reconstruction and Recovery from the Great East Japan Earthquake
A few months after the occurrence of the Great East Japan Earthquake, the Basic Act on Reconstruction from the Great East Japan Earthquake and the Basic Guidelines for Reconstruction from the Great East Japan Earthquake were finally established in order to deal with the disaster. It is highly important that the Act and Policy incorporate the establishment of the "Reconstruction Agency" and "systems of special zone for reconstruction", both of which have been espoused by the Kansai business community. What must be done from now on is to hasten efforts toward full recovery and to support the hope and determination of victims and people in the afflicted areas.
While prompt reconstruction and recovery efforts must be conducted,these efforts should not be deemed to be only for reconstruction and recovery. It is necessary to regard creative recovery as a growth strategy and to lead such recovery to new economic development of this country. Essential in this case is the viewpoint that compatibility must be ensured between improving financial health and securing funds necessary to steadily promote the recovery.
After the disaster, the Kansai Economic Federation established the Emergency Disaster Response and Support for the Great East Japan Earthquake Special Committee. As indicated by this, all of western Japan has been engaged in supporting recovery from the disaster, and will continue to offer support in a timely manner with due attention paid to needs in the afflicted areas.
The pivotal functions for Japanese politics, administration and economy are highly concentrated in Tokyo. It is urgently needed, in terms of national risk management, to establish a backup system for such pivotal functions. Furthermore, the viewpoint is indispensable that solving problems entails the promotion of decentralization.
Featuring full-fledged traffic and information & communication infrastructures connecting with Tokyo and many other parts not only in Japan but also in the rest of the world, the Kansai region is the best place to act as the backup function for the capital. Moreover, the Union of Kansai Governments, established in December 2010, has already achieved excellent results in their recovery support efforts, demonstrating their regional power. Based on these potentials of Kansai, efforts must be commenced immediately to establish a backup system for this country's pivotal functions.
2. Implementing the Growth Strategy Steadily and Promptly
Japan's economic growth has been achieved so far mainly through manufacturing. To ensure that economic development continues, there is no alternative but to increase the country's exports, by positioning manufacturing as the engine for economic growth and attracting more demands from rapidly-growing Asia.
Nevertheless, the Japanese export industry has been suffering from the sextuple difficulties: an internationally high corporate tax rate; labor regulations, such as the prohibition in principle of temporary-staffing in the manufacturing industry; delay for response to economic partnership agreements, such as TPP; the goal of 25% decrease in greenhouse gases; the unprecedented super-strong yen; and the power supply shortage. Efforts that companies can make in this country have already been strained to the limit.
The outflow of resources of the manufacturing industry to foreign countries has already been under way. If no measures are taken, problems will arise, such as the loss of employment opportunities in Japan, the collapse of regional industries, the deterioration of the manufacturing environment where skills and know-how are generated, and the decline and loss of Japan's internationally competitive characteristics to produce trade surplus. This will result in the loss of the development foundation for Japanese economy.
To solve the sextuple difficulties, the first thing for the new administration to do is to prioritize immediate problems, such as correction of the super-strong yen and solution of the power shortage, and to launch actions immediately to establish an environment where companies can demonstrate their fullest vigor and abilities in global competition. At the same time, the administration should focus on the implementation of measures to underlay the competitiveness of companies, such as the development of excellent human resources and the promotion of research in advanced fields in order to create innovation.
To be more concrete, it is strongly desired that the New Growth Strategy, decided by the Cabinet in June 2010, should be implemented rapidly. This will contribute to an early recovery from the disaster.
The Kansai Economic Federation is currently emphasizing promotion of exports of environmental infrastructures to Asian countries, under the slogan of "Kansai: an Environmentally Advanced Region." Also, the Federation offers support to research and development that will lead to the creation of new industries, such as robotics and bio-industries, in Kansai Science City (also called Keihanna). We at the Federation believe that these efforts feature many vital elements to be connected to the government's New Growth Strategy.
3. Launching Measures Immediately to Improve Financial Health
With social security and other costs included, Japan's ratio of long-term outstanding loans to GDP exceeds 200%. Japan's financial crisis is more severe than that of the U.S. and European countries. There is a growing view that, if the government cannot present finance recovery measures immediately, a financial collapse in the near future will not end up being merely a groundless fear.
It is absolutely necessary to secure a financial resource for the recovery with financial discipline maintained and to conduct drastic tax and financial reforms. In addition, in order to achieve a surplus of the primary balance by FY 2020, as described in the Fiscal Management Strategy decided by the Cabinet in June 2010, it is imperative to implement the Growth Strategy and to inaugurate reforms of the tax and social security systems as soon as possible.
The new administration should initiate a reform immediately to realize a sustainable social security system that people can rely on. No delay is permissible in implementing concrete measures to improve income and expenditure, such as raising the consumption tax rate and curtailing social security costs.
4. Securing Stable Power Supply
The establishment of an appropriate energy policy requires discussions based on short, medium and long-term perspectives. A national energy policy, which is a critical issue affecting Japanese economy and society, must be established with due consideration given to Japan's situations and scientific views.
The direction of medium and long-term energy policies must be established immediately, incorporating the use of nuclear power plants with safety as a fundamental premise, the utilization of renewable energy, the development of new energy, and the realization of an energy-saving society. Such establishment must feature a realistic, comprehensive perspective with consideration given to the balance between the environment and economy, as well as to energy security and other issues.
In this context, in order to realize recovery, economic growth, and financial health improvement, which we request the new administration to achieve, it is necessary to solve the current power supply shortage immediately.
There is no denying that this summer's power supply shortage considerably affected the life of people and industrial activities in Japan. The government should take it more seriously that there is a grave concern in the industrial community about a power supply shortage this winter, which is expected to be more severe than that of this summer. Stable power supply must be restored as soon as possible, by the resumption of operations of nuclear power plants that have passed periodic inspection. Under the responsibility of the government, the resumption must entail the understanding and agreement of local communities.
5. Establishing Active Diplomacy in Pursuit of National Benefits
In the world's increasingly globalized society, it is important for Japan to secure active and independent diplomacy.
Economic and security problems must be solved with the cooperation of the U.S. based on the strong alliance between Japan and the U.S. Also, in order to ensure that Japan, facing the declining birth rate and aging population, can achieve sustainable development, various actions should be taken, including the promotion of the conclusion of economic partnership agreements, such as TPP, and demonstration of the Prime Minister's leadership in efforts promoted both by the public and private sectors to export infrastructures. Moreover, it is necessary to make use of the vigor of Asia, including countries that are currently showing remarkable growth, such as China, India, and ASEAN countries, and to deepen cooperative relationships to ensure that Japan's economy will develop together with the Asian economy.
Requests to the Noda Administration
"Urgent Appeal" Regarding Reconstruction and Support
Following the Tohoku-Pacific Ocean Earthquake
Support and recovery following the recent unprecedented catastrophe are expected to have ramifications beyond the difficulties and other issues faced by the localities directly affected. The Japanese economy and society as a whole must take the situation very seriously and direct all its strength toward post-disaster support and recovery. We strongly believe that this hardship must be overcome through mutual cooperation as a long-term nationwide movement.
Kankeiren reiterates its resolve to extend maximum support and cooperation not only toward immediate reconstruction and relief efforts but also toward medium to long-term full-scale recovery, in partnership with the Tohoku Economic Federation, Union of Kansai Governments and other relevant public and private bodies. At the same time, we urge the government to meet the following requests regarding immediate reconstruction and relief measures:
1. Swift adoption and implementation of the supplementary budget
Government measures pertaining to post-disaster support and recovery require implementation that is timely and appropriate to each phase. For the present, early adoption and implementation of the first supplementary budget for fiscal 2011 are necessary to restore daily living and economic infrastructure in stricken areas as quickly as possible. We think it important that the first supplementary budget take the following items into consideration:
(1) Support for early restoration of lifelines, including electricity, gas, water and communications
(2) Early construction of temporary housing
(3) Support for early recovery of medical, educational and welfare facilities
(4) Early restoration of transportation and logistics infrastructure, including roads, railways, seaports and airports
(5) Support for maintaining employment in afflicted areas, for example through accelerated application of employment adjustment subsidies
(6) Reinforcement of financial assistance for businesses in afflicted areas (issuance of emergency loans, etc.)
As for sources for the first supplementary budget, we feel the government needs to secure a total amount in the order of five trillion yen, by tapping economic-crisis and regional-revitalization reserves and also by freezing, in the light of the present emergency, expenditures pledged in the Manifesto (child allowance, individual-household income compensation program for farmers, trial of the toll-free expressway, etc.).
2. Swift implementation of countermeasures against negative effects on the nation's economic activities
The earthquake is affecting economic activities nationwide, as manifested in the drastic fall in stock prices, sharp rise of the yen, rise in gas prices, electricity supply shortages and the shortage of certain commodities as well as in other production and distribution functions. Unless the entire country stabilizes its production and supply capabilities and finance, the support needed for reconstructing and rebuilding afflicted areas may be disrupted. As such, we urge the government to swiftly consider and implement measures including those listed below, to counter negative influences on nationwide economic activities.
The government should also promptly establish a regime for powerfully propelling reconstruction planning, and present its roadmap without delay.
(1) Flexible application of pertinent laws
Corporations headquartered or located in afflicted areas should be able to continue necessary economic activities by applying relevant laws flexibly. Specifically, postponement of deadlines for formalities and reports under various corporate statutes (Companies Act, Financial Instruments and Exchange Act, etc.), and simplification of procedures for changing business hours under the Act on the Measures by Large-Scale Retail Stores for Preservation of Living Environment are high-impact measures calling for swift action. Corporate combinations (e.g. mergers) sought from the point of view of maintaining the nation's production and supply capacity, or assisting corporations struggling as a result of the disaster should also be granted swift reviews in consideration of their purposes.
(2) Financial stabilization
Since the earthquake and tsunami disaster is expected to have repercussions for the entire nation, financial stabilization will be crucial to corporations directly involved in reconstruction and recovery as well as corporations in various regions that are supporting such efforts. We ask the government to take the necessary action, including decisive steps, against excessive appreciation of the yen in coordination with monetary authorities in other countries. For the sake of financial stability, including stability of the stock market, again we ask the government for the early adoption of a first supplementary budget that includes the issuance of emergency loans, and appeal to the Bank of Japan to implement additional monetary easing steps.
(3) Securing supplies of daily necessities for afflicted areas
At this moment, priority should go towards securing supplies of daily necessities for afflicted areas. The government must take the initiative to this end, not only by utilizing national emergency stockpiles but also urging the business community to increase supplies of daily necessities so as to remove public anxiety. This should prevent excessive consumer hoarding and help secure daily necessities for those afflicted.
(4) Continuation and reinforcement of essential economic activities
Instead of reducing normal economic activities in reaction to the earthquake and tsunami disaster, corporations in Kansai and western Japan need to actively support the Japanese economy by, for instance, expanding production and employment as much as possible so as to help afflicted areas. The government should request corporations to take such actions and at the same time secure distribution routes to eastern Japan as well as transportation fuel, and implement tax, fiscal and financial measures to support capital investment and employment growth.
Kankeiren and Kansai Association of Corporate Executives hosted the "49th Kansai Economic and Management Summit" (Kansai Zaikai Seminar) on February 9-10, and adopted the declaration as follows. Declaration
