"The World and Japan" Database (Project Leader: TANAKA Akihiko)
Database of Japanese Politics and International Relations
National Graduate Institute for Policy Studies (GRIPS); Institute for Advanced Studies on Asia (IASA), The University of Tokyo

[Title] Keynote Address by Prime Minister Shinzo Abe at The Economist Japan Summit 2015

[Date] July 9, 2015
[Source] Prime Minister of Japan and His Cabinet
[Notes] Provisional translation
[Full text]

Dominic Ziegler, Anton LaGuardia, Andrew Staples, Chris Clague, ladies and gentlemen, I am very much honoured to be back here speaking to you for a second consecutive year.

Quite a number of things have happened in between.

At the end of last year, I called a snap election, asking the voters to endorse Abenomics. One year ago, it was beyond my wildest imagination that such a thing would come to pass.

Our ruling coalition succeeded once again in winning a sizable number -- more than two-thirds -- of seats in the Lower House. Fortunately, I am joining you here today as the incumbent, not as an ex-, prime minister.

My policies of Abenomics garnered a clear mandate from the voters, which was most helpful.

Carrying out reforms

I will accelerate my Growth Strategy at an even greater pace. I will 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.

Dubbing the Diet session that's been going on since January "the Session to Carry Out Reforms," I have put forth a variety of bills to do just that.

Well, I see some of you look surprised.

You might have thought that in Japan they are preoccupied not with the economy but with the national security debate.

I appreciate your continued interest in Japan, and thank you for closely following what the Japanese press have to say.

But, ladies and gentlemen, truth be told, "No news is good news."

Take a look at the net earnings of TSE-listed companies. They've surpassed, for the first time in history, 20 trillion yen -- that's 163 billion U.S. dollars.

The ratio of job offers to seekers hit a 23-year high, and just as it did last year, this past spring Corporate Japan yet again raised wages by more than 2 per cent.

Last year, we had a dip in the economy. That was to do with the hike -- by 3 percentage points -- of the consumption tax. And I know some of you were duly worried. If you look at the picture now, corporate profits are on the wax. Those profits are getting cycled back into growth of jobs and wages. Call it a virtuous cycle of economy, which has finally been set in train. At the moment, the economy is growing at an annualised rate of 9 per cent.

The 2014 fiscal year also saw our tax revenues hitting a 21-year high of 54 trillion yen, which was roughly 4 trillion yen larger than our budget estimate. For fiscal 2015 we were able to put forth a budget aiming at halving our primary deficit. Last month we also compiled a concrete plan in order for us to achieve fiscal consolidation over the next five years.

See, our economic policies have stopped providing a point of contention. Little wonder the opposition stopped debating Abenomics. The more they discuss it, the greater value they will have to admit in the improved numbers and figures.

Indeed, on economic policies, deliberations at the Diet have faced little resistance. Already passed and made into law includes the Energy Market Reform Bill, which liberalises the markets for power and gas utilities, the bastions of oligopolies for the last 60 long years. Our health insurance will undergo reforms due to the bill the Diet also passed.

Also for the first time ever in the last 60 years, the Nôkyô, or agricultural cooperatives, will be transformed because the bill to change their structure already passed the Lower House and is now being discussed by the Upper House.

Two and a half years ago, the "Three Arrows" I had launched met a great deal of controversy at the Diet. The media debated them day in and day out. I have flown twice, just like Clark Kent, on the cover of The Economist. Well, it's been a while, regrettably, though.

No news of late is actually good news. Abenomics is in fact picking up acceleration, a point I would like you to take home today.

The Growth Strategy

Beginning last month, 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, which we acquired by learning from the UK, 191 institutional investors have adopted it as of now.

It is incumbent upon us 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.

Over the past two and a half years, 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.

Meanwhile, the number of female board members of listed companies is now 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.

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.

Please remember that for our Growth Strategy there is a key concept of carving out our future through a revolution in productivity.

Let me tell you that this past spring while I was in the U.S., I visited MIT and Silicon Valley. I saw tinted windows that generate electricity. I witnessed further 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, and convinced me 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.

My hope, though, is that they are not content with being merely national champions, but rather, ever keener to exploit their entrepreneurial vigour. With that in mind, we have launched a new project under which we will select 200 businesses over the next five years and send them off to Silicon Valley.

By competing neck and neck with some of the world's topmost players there, they shall aim at becoming world champions.

Preparing the investment climate

I would also like more and more world-leading companies to come set up shop in Japan.

I am of a belief that they will first of all create more jobs, and even more importantly, they should serve as splendid stimuli for Japanese companies.

Not so long ago, when asked to name an overseas destination for investment, multinationals would say that they should go to China.

Some of the polls of late show, however, Japan outranking any other destination as a host for R&D investment. Come spring next year, the apple logo will touch down in Yokohama, Japan, where the iPhone manufacturer will open an R&D centre, the first ever in Asia.

Since I 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.

If you look at what we have introduced such as Special Provisions for Companies Conducting Field Testing, National Strategic Special Zones, and other regulatory reforms, our toolkit is out there for you to exploit.

Should there be any institutional barriers, we will remove any and all of them. Moreover you now have a designated State Minister who, as an elected official equipped with political power, listens to, and helps resolve, your company-specific concerns and does so in a swift fashion. So rest assured.

What's important 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.

Towards that end we decreased the effective corporate tax rate by 2.5 percentage points beginning this past April. By April next year, we aim to make that rate cut reach a minimum of 3.3 percentage points in total, and preferably more, compared with the rate in place till the end of this past March.

We 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.

Taking steps beyond Japan

Beyond this, 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.

In any negotiation, it is the last one inch that is the most challenging, of which I am fully aware. Still, it is incumbent upon the joint leadership of Japan and the U.S. to bring the negotiations to the earliest conclusion.

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.

In conclusion

Fair play right through to the end. In the FIFA Women's World Cup, our "Nadeshiko Japan" team really gave their all.

The world-renowned newspaper of The Economist is of course a product of England, the birthplace of modern football. Nadeshiko advanced to the final because the formidable English team let it happen. Regrettably, though, it did not pay off.

Still, even when behind by four points, Nadeshiko regained two, never letting their vigilance wane.

The sight of our ladies never giving out and never giving up until the final whistle sounded was, in my mind, a tremendous inspiration for all of us in Japan.

What the legendary player Ms. Homare Sawa had to say after the match was impressive.

"I gave it everything I had. I have no regrets." A very sobering feeling came over me upon seeing that truly refreshing approach.

Trying for all one's worth on the world stage is no easy task. I am truly proud of the 23 members of Nadeshiko Japan who put that into practice so marvellously to achieve such a superb result of second place.

The Japanese economy also still holds tremendous potential. Of that, I am perfectly certain. All that remains is whether we can bring out our best, without any regrets.

Fair play right through to the end. Never giving up or giving out until the final whistle sounds. I, too, am determined to work to the very best of my ability bringing the Growth Strategy into execution, so that I, too, can say, "I gave it everything I had. I have no regrets."