Japan under Shinzo Abe is determined to accelerate Growth Strategy at a greater pace
Tokyo: Towards the end of 2014, Japanese Prime Minister Shinzo Abe had called a snap poll seeking voters’ mandate in support of Abenomics.
After the ruling coalition succeeded in winning more than two-thirds of seats in the Lower House, Abe has observed: “it was beyond my wildest imagination that such a thing would come to pass.’
Delivering the keynote address at The Economist Japan Summit 2015 earlier this month (9 July 2015) Abe went on to assure the voters that he would accelerate his Growth Strategy at an even greater pace. He also announced that he would go for reforms and “all at once break through the regulations, systems, and conventions that are like solid bedrock and have hindered Japan’s growth for many a year”.
Drawing attention to the net earnings of TSE-listed companies, Abe said they have surpassed 20 trillion yen — that’s 163 billion U.S. dollars. The ratio of job offers to seekers has also hit a 23-year high and Corporate Japan this past spring again raised wages by more than 2%.
Telling the gathering that “no news of late is actually good news”, the Japanese Prime Minister said that Abenomics is in fact picking up acceleration.
Focusing on his Growth Strategy, Abe said that beginning June this year, more than 2,000 publicly traded companies have adopted the Corporate Governance Code. Over the last two years, the number of companies appointing independent non-executive directors has roughly doubled. As for the Stewardship Code, acquired by learning from the UK, 191 institutional investors have adopted it till now.
Abe said with an air of pragmatism that it is incumbent upon his government to strengthen corporate governance and change the mindset of Japanese executives, who will no longer be forgiven for continuing the kind of management that is inward-looking or risk averse. A new mindset to be embraced should encourage the people in Japan to look beyond their home country at the far wider world, and set sail vigorously into the rough waters of international competition. — That fundamentally sums up my own belief that is at the base of my Growth Strategy, said Abe.
Over the past two and a half years, the Prime Minister said the number of employed workers has increased by one million people, and I am happy to report that more than 900 thousand of them are women. The number of female board members of listed companies is also increasing at a pace of six times the former figures. Without women, and indeed, without non-Japanese human resources, we can no longer contend on the global stage, he observed.
Spelling out his vision for the production function, Abe said that there is a key concept of carving out our future through a revolution in productivity. He emphasised: “It will also be necessary to introduce more diverse and flexible work styles and raise our labour productivity. We shall also rigorously take advantage of ICT, robots and other new technologies. Komatsu, the second largest earth mover manufacturer in the world, is a case in point. I had a chance to go see its newest plant the other day, and learned that the electricity costs, plant-wide, had been slashed by as much as 90 per cent in only five years by employing cutting edge technologies. The plant will achieve what is called net-zero energy usage sooner rather than later. We are now in an age in which robots make robots. To see how it’s come about, you need only go inside a plant of Fanuc, the world leader in industrial robotics, where you scarcely see any human beings at work.
Recalling his recent tour to the U.S., where he visited MIT and Silicon Valley, Abe talked of tinted windows that generate electricity and evolution of social networking services. Big data and artificial intelligence were giving birth to ever-newer kinds of businesses. Springing out, I should say at a breath-taking pace, was a whole variety of hugely imaginative ideas that were almost jaw-dropping, the prime Minister said adding he is convinced that Japan should also run fast and catch up to their pace in order to continue growing in a sustainable way.
It holds true that also in Japan there are any number of SMEs shining with brilliant ideas and technologies. The fact also remains that they are the ones that have long supported Japan’s manufacturing prowess. Emphasising that he was keener to exploit their entrepreneurial vigour, Abe said with that in mind, his government has launched a new project under which 200 businesses will be selected oand sent off to Silicon Valley in next five years. He also spelt out the target in these words: “By competing neck and neck with some of the world’s topmost players there, they shall aim at becoming world champions.”
Abe said that he would also like more and more world-leading companies to come set up shop in Japan. They will first of all create more jobs, and even more importantly, they should serve as splendid stimuli for Japanese companies, he said adding not so long ago, when asked to name an overseas destination for investment, multinationals would say that they should go to China. Abe pointed out that some latest surveys show Japan outranking any other destination as a host for R&D investment. Next year, the apple logo will touch down in Yokohama, where the iPhone manufacturer will open an R&D centre, the first ever in Asia.
Since Abe took office in December 2012, the amount of FDI into Japan has increased to more than ten times its previous level. But this is far from sufficient Abe said indicating there is no room for complacency. The Prime Minister drew attention to Special Provisions for Companies Conducting Field Testing, National Strategic Special Zones, and other regulatory reforms. Should there be any institutional barriers, they shall be removed.
What’s important, Abe said, is to turn Japan into an investment destination that anyone, regardless of nationality, should find attractive. Japan must outperform other nations as the most business-friendly country. Otherwise, we could not expect growth in investment even from the Japan-based companies, for globally, competition only intensifies.
Abe said that his government will press forward with corporate tax reform by reducing the effective corporate tax rate down into the twenties over the course of several years, bringing it to a level that compares favourably in the international context.
Underscoring steps beyond Japan, Abe said:
- Japan will amply broaden its windows towards an open world. Japan is determined to be a hub for creating a free, fair and dynamic economic zone for the entire world.
- As for the negotiations for the TPP, with the passage of the trade promotion authority in the U.S. Congress, the finish line has come within reach.
- As regards Japan-EU EPA negotiations, both parties have agreed to accelerate the process, aiming at reaching an agreement by the end of this year. Japan is also determined to play a major role towards an early agreement on the RCEP.
- As globalization progresses and our mutual interdependence deepens, it is ever more necessary for countries to work more closely hand-in-hand, aiming at enhancing the stability of the global economy and financial systems.
- Japan will continue to make its utmost efforts going forward in cooperation with the countries of the G7 as well as Asian countries.
- Regarding the recent developments in Greece, we will closely cooperate with the G7 countries and cooperate towards the stabilization of the Euro area economy as we monitor the progress of consultations among the relevant parties.
- It is not the state but the companies therein that generate growth. Innovation will never arise from markets in which bad drives out good, with counterfeit and pirated goods crowding out the technologically advanced.
- Free competition in the private sector takes place under the legitimate economic mechanism of better products and services being evaluated properly. It is only from there that we can expect sustained growth to come about.
- Japan will demonstrate leadership in aiming to create a fair and sustainable market that is not swayed by the arbitrary expectations of any country.
Source: Official Website of the Prime Minister of Japan and His Cabinet (Keynote Address at The Economist Japan Summit 2015)