OECD Ministerial Council Meeting - Keynote Speech by Prime Minister Abe
Tuesday, May 6, 2014
OECD Headquarters, Paris, France
1. Introduction: The time for change is now
Secretary-General Gurría, thank you very much for such a gracious introduction. I had the honor of welcoming you to Tokyo last month, and today we have come to meet again in Paris. I am extremely pleased that we were able to reconfirm the deep bonds of friendship between Japan and the OECD.
I also wish to express my sincere appreciation to you and the OECD for last month compiling an extremely insightful paper on policy recommendations for Japan. In the opening section, Secretary-General Gurría sent to Japan a statement of encouragement: “The time for change is now.”
I share the very same opinion. Japan is determined to carry out reform without fail. Moreover, reform is already underway.
My desire to state this has brought me to this historic Château de la Muette today.
2. The conditions for reform are all set
Japan has suffered under deflation for nearly 20 years. Merely by owning an asset, its value increases. Deflation is a terrible demon that absconds with people’s desire for change.
Seven years ago when I previously served as Prime Minister, the Japanese economy was better than it is now. And yet, little headway was made on reforms.
This is because we were unable to banish the demon of deflation. With wages stagnant, the public was unable to reap the benefits of a good economy.
But the Japanese economy has been reborn through my “three arrows.” Compared to seven years ago, the economic landscape has changed completely.
Since Abenomics began, the ratio of job offers to job seekers has risen for 16 consecutive months, and now stands at 1.07 offers of employment for every person seeking work.
This spring, a large number of companies took the decision to raise wages. Monthly wages will rise by more than 2 per cent. We will aim at further economy recovery through an expansion of consumption.
According to an analysis by the Bank of Japan, all of Japan’s nine regions are in the midst of an economic recovery. Business sentiment among small- and medium-sized enterprises turned positive at the end of 2013, an accomplishment not seen in an astounding 21 years and 10 months among non-manufacturers.
I believe it would be fair to say that Japan is now truly on the verge of pulling out of deflation.
(Four economic cycles)
The future also looks encouraging. One economist points out that from now, the waves of four economic cycles espoused by distinguished economists are all now on the upswing in Japan.
Beginning this autumn, construction will begin in Japan on the Chuo Maglev Shinkansen, which uses superconducting magnetic levitation technology. This bullet train reaches speeds of 505 kph, the fastest in the world. The other day, I had the opportunity to experience that speed for myself. Ten years ago, when I first had a test-ride, there was a substantial amount of vibration and noise. Last month, that had been transformed into an extremely comfortable ride.
After more than 40 years since the first success during testing, the technology has at long last evolved to the stage of practical use, and an investment of no less than US$90 billion is just about to commence.
In the field of regenerative medicine, Nobel laureate Dr. Shinya Yamanaka has materially opened up the avenue toward practical application. In the years to come, we can expect this field to receive capital investment at an enormous scale.
Super-long-term “Kondratiev waves” that follow a 50- to 60-year course have hit their cyclical bottom and have commenced their upswing. That is today’s Japan.
The other day, Secretary-General Gurría visited the Otemachi district of downtown Tokyo. I wonder if he might have gotten a bit fed up at the sheer number of signs there announcing “construction in progress.”
Now, half a century since the Tokyo Olympic Games of 1964, large-scale redevelopment is taking place in the very heart of Tokyo. And in 2020 Tokyo will once again host the Olympic and Paralympic Games. Preparations for the Games will also now take place in earnest.
Investments for large-scale construction projects are causing the long-term cyclical “Kuznets swings” also to make their way upwards. That is today’s Japan.
(I will never be afraid of reform)
While I do not have enough time to expound on all four of these economic cycles, I trust that you have come to understand what is now happening.
The Japanese economy is back. The vigorous economy that was once brimming with vitality as the “engine of world growth” has returned once again.
The Japanese people are reaping the benefits of economic revival. The conditions are all set. Now, it’s time for bold reforms.
Therefore, I decided to raise the consumption tax rate last month for the first time in 17 years. In the interval as Japan was ensnared under the foot of the deflation demon and postponed raising the rate, the elderly population increased by 13 million people while social security benefits increased by 40 trillion yen. We are going to achieve the three goals of revitalizing the economy, rebuilding government finances, and reforming social security, and we will achieve these concurrently. I will never be afraid of reform.
In Japan’s electricity market, for over 60 years, one enormous electric power company in each region has monopolized a range of functions from power generation to power transmission and retail. Taking 2020 as the target year, I will reform this into a completely competitive market. I will never be afraid of reform.
Various kinds of originality and ingenuity within a free marketplace give rise to dynamic innovation.
We are also undertaking reforms in medical services. In regenerative medicine, we have already implemented regulatory reforms that make use of the vitality of the private sector. On the foundation of Japan’s world-class universal health insurance system, patients battling difficult-to-treat illnesses will be able to have more improved and expeditious access to the latest advanced treatments which are yet to be covered by the public health insurance system, should they wish them. We have already launched a reform project to make this possible. I will never be afraid of reform.
In our cities, which are in competition with other cities all over the world, we will undertake bold regulatory reform ahead of other areas under the leadership of the national government. The National Strategic Economic Growth Areas, which have been created for just that purpose, are also now about to be launched. We lowered the corporate tax by 2.4 per cent beginning last month. In this age in which companies are active at the global level, we will press forward with further reforms to our corporate tax.
I wish to reiterate, I will never be afraid of reform.
The Musée Marmottan Monet is within walking distance from here. I have heard that on the walls there, a series of Claude Monet’s “Water Lilies” paintings are displayed, virtually covering the walls.
It is said that Monet continued painting “Water Lilies” with great tenacity and devotion in his later years, despite the physical limitations brought by failing eyesight.
I myself shall continue implementing reforms, too, with great tenacity and devotion.
Just as Monet enabled the magnificence of impressionist art to become firmly established through his unwavering spirit, I’m sure that Abenomics will come to completion only through tenacious devotion to reform.
3. Building a new economic order of the 21st century
(Accelerating negotiations on economic partnership agreements)
The topmost agenda item on my list of reforms is to accelerate negotiations on EPAs with our economic partners around the world.
The OECD—the most influential economic thinktank in the world—forecasts the Asia-Pacific region as the region expected to undergo rapid growth in the years to come. Japan is no longer part of the “Far” East. Rather, it is at the very center of the Pacific Rim. There is no sense in failing to utilize this geographical advantage.
Last year, I visited all ten ASEAN member nations and invited the ASEAN heads of state and government to Japan at the end of the year, thereby deepening our mutual bonds of friendship. Looking back to seven years ago when we reached agreement in principle on the major elements of the ASEAN-Japan EPA negotiations, that was when I was Prime Minister.
We just reached agreement in principle last month on the Japan-Australia EPA. Negotiations are also in their final phase on the Trans-Pacific Partnership (TPP) Agreement, which will create a single major economic sphere in Asia and the Pacific. Japan and the United States will act in cooperation to accelerate negotiations further towards the early conclusion of negotiations by the 12 participating countries as a whole.
My European friends, should you be thinking of investing in this growing Asia, I highly encourage you to come invest in Japan. Japan boasts not only a wealth of natural beauty, tasty water, and clean air, but also ski slopes with an abundance of powder snow every bit as superb as in Europe. Should you find any impediments that dampen your willingness to invest, please let me know immediately. No matter what the “bedrock” of vested interests might be, it will be no match before the “drill bit” that I have become.
A major economic sphere is now emerging in Asia and the Pacific. The gateway to this is Japan. Japan welcomes your investments.
(The goal of my EPA strategy)
Regional trade liberalization results in less economic welfare than global trade liberalization. You as OECD economists might come to this initial conclusion.
However, Japan promotes multilateral EPA negotiations, such as those underway with the EU, not simply in pursuit of abolishing tariffs. Instead it also stems from our wish to build a new economic order.
Just after the Lehman Shock, nations had no alternative but to be involved in full-scale economic management. The “emergency evacuation” type of actions observed in a large number of countries might have been unavoidable to an extent.
However, at present we are recovering from the Great Recession, making this a good time to retrace our steps back to the starting point.
Economic growth is not something that is generated by the state. It instead arises from competition within the private sector.
With free trade ensured and the rule of law upheld, and equal opportunity guaranteed for all—I believe that on the basis of those values we can revive a vibrant economy, which will foster the emergence of free institutions, to paraphrase what George Marshall said 67 years ago.
We must not allow free riding on intellectual capital. We must not have a situation in which some come to prevail in price competition by compelling workers to labor under severe conditions or by discharging loads into the environment.
Much like Thomas Gresham, who was anxious in the 16th century about the drain of one-pound gold coins over the border, should we find ourselves in a situation where “bad technology drives out good,” then sustained growth will be compromised.
Together with countries that share our fundamental values, I will create a major economic sphere that ensures competition under fair and impartial rules.
If that economic sphere is duly appealing, then the number of countries wishing to participate will also increase. I welcome such countries. However, in order to participate, they must agree to the new economic order.
In this way, fair and impartial rules for competition will spread around the world. That is the goal of my EPA strategy.
I regard you in Europe as surely the most likely to be able to share those values. Then we will certainly be able to overcome small differences in our positions and other such situations. I believe that an EPA between Japan and the EU should be concluded at the earliest possible time.
(The mission of the OECD)
The OECD has made contributions to the creation of global rules for many years.
However, in my view, the priority at present should not be how to refine the rules being implemented within the OECD member countries so much as how to have emerging economies and other non-member countries share fair and impartial rules for competition.
“Any assistance… should provide a cure rather than a mere palliative.”
I believe that the OECD, which originated from these words by Marshall, must have a mission of expanding fair and impartial rules widely around the globe.
In building a new economic order of the 21st century, I have great expectations for the wisdom and leadership found in such great abundance in the OECD.
4. Challenges for the globe and for Japan
(The world 50 years hence)
Fifty years have now passed since Japan’s accession to the OECD.
It is truly an honor for Japan to chair the Ministerial Council Meeting in this memorable year. I would moreover like to take this opportunity to express my appreciation to the United Kingdom and Slovenia, who are serving as Vice-Chairs of the Meeting and who have been instrumental in working with Japan in order to lead this Meeting to a successful conclusion. I would also like to thank Secretary-General Gurría and the others at the OECD Secretariat for their devoted contributions towards ensuring this Meeting’s success.
Here today, we no longer need to look back on the past 50 years. Instead, we should discuss how the next 50 years will become.
The “OECD@100” project does provide us with some substantial clues, but forecasts are not necessarily rosy.
The pace of growth for the world as a whole is decelerating significantly. Reasons for this include that the widespread diffusion of technologies throughout the world diminishes the capacity for growth of a “catch-up” nature, while the rate of expansion of human capital declines.
It is almost as if we are looking at present-day Japan. Japan is facing the challenges of a dwindling birthrate and aging population, and it is virtually assured that the 21st century will be a century of population decline.
However, with every crisis there comes an opportunity. I consider such times as these to be tremendous opportunities to refashion our thinking and push forward with structural reforms.
It is said that 150 years ago, a great number of Japanese works of art traversed the oceans to stoke the creative passions of Monet and other impressionist painters, in the form of Japonisme.
I believe that Japan’s forthcoming efforts for structural reforms can also be a model providing major inspiration for the future of the global economy.
(A new Industrial Revolution through robots)
In Japan, the service sector accounts for some 70 per cent of added value and employment. However, the fact that it is highly labor-intensive and difficult to raise productivity has been a major challenge.
For example, at meat-processing plants, a large number of workers conduct simple and tedious work over the course of many hours.
In Japan, robotics technology helps this case. A robot made in Japan known as “HAMDAS” debones pork automatically, and it is already in use here in France as well.
There is a full array of such machines, including “TORIDAS” for chickens and “TAKIDAS” for turkeys.
A HAMDAS robot can halve the number of workers necessary at a processing plant. What’s more, those workers will now be responsible for more highly value-added labor that can only be performed by humans. This makes rapid advances in productivity possible.
The low level of productivity within the service sector is an issue faced in common the world over. The further improvements to and spread of robotics technology will surely be a significant trump card, solving such challenges at a single stroke.
At manufacturing plants as well, robots hold the promise of dramatically increasing the productivity of the production line.
We will create a “new Industrial Revolution” through the use of robots. I will swiftly formulate a master plan for this and incorporate it into my growth strategy.
In Japan, we have already begun to utilize robots in a variety of fields including nursing care. I intend for Japan to be a pioneer at the global level, becoming a showcase for the use of robots.
(Continuing to bring about innovations)
If we continue to bring about innovations of all types, not just in the area of robots, there is no question that this will be a key to increasing added value and driving economic growth.
Compact disks were a major driving force behind the digital revolution. The story of how this innovation came about yields some meaningful insights for us.
Why is it that compact discs are 12 centimeters in diameter?
It was not decided by engineers with engineering degrees. It was in fact decided by Norio Ohga, a baritone singer who became the president of Sony.
Beethoven’s Ninth Symphony, which runs for close to 70 minutes, must be able to fit on a single compact disk. Mr. Ohga’s passion led them to abandon the initial plan of a disk with a smaller diameter and 60 minutes of recording time and to create a 12-centimeter disk capable of recording 75 minutes.
As a result, CDs were well received by music aficionados and this innovation spread to every corner of the globe.
In this way, the compact disk came into being precisely because the developers had the perspective of a baritone singer, which was different from that of the engineers.
We must first rid ourselves of the notion that “only engineering brings about innovation.” Society is becoming increasingly complex. We live in an era that demands a broad-based background, including knowledge of management and psychology and being well-versed culturally.
One survey shows that among patent applications submitted by universities, in the United States, roughly 15 per cent of them link to new businesses, whereas in Japan the figure is only about 0.5 per cent.
In Japan we have always conducted one-track education that treats everyone the same.
After six years of elementary school, three years of junior high school, and three years of senior high school, over half of Japan’s university science students enter the research laboratories of engineering departments. This pattern has been repeated over and over again through the years.
However, this kind of “monocultural” higher education never engenders innovative ideas.
That is why I am pressing forward with education reforms. Rather than deepening academic research that is highly theoretical, we will conduct more practical vocational education that better anticipates the needs of society. I intend to incorporate that kind of new framework into higher education.
(Drawing out the potential of all people)
I understand that at lunchtime in the Opera Quarter, Parisians form lines at shops selling Japanese-style prepared lunches known as “bentos.” They seem quite popular, being both visually appealing and reasonably priced.
If any of you here have yet to try one, I would be pleased if you go try one for yourself at lunchtime today. Just take Metro Line 9 from La Muette station and transfer to Line 3.
What is so marvelous about a “bento” lunch is that the lunch box is divided into smaller sections, making it possible to arrange a well-balanced meal that includes a wide variety of foods, such as rice, vegetables, or meat.
Bento lunches are relished by meat-lovers and vegetable-lovers alike, as well as by those concerned about their health. This very flexibility is a key characteristic of the bento lunch.
These bento lunch boxes provide us insights on structural reforms that Japan, and indeed the world, should advance. The key word here is “variety”—in other words, “diversity.”
(1. A society in which women shine)
In Japan, it has been men, who make up only half the population, that dominated the economy for a great many years. It was only a matter of time that this would ultimately run up against a wall.
I always cite a quote of Ms. Arianna Huffington, which goes, "If 'Lehman Brothers' was 'Lehman Brothers and Sisters,' they might still be around."
Half of the world’s consumers are women. Without the contributions of women, we would be unable to develop products and other things that are appealing to women.
The presence of men—myself included—has hindered active engagement by women. Therefore, in Japan, we have set a target of having women occupy 30 per cent of positions of leadership within society by 2020.
We must also reform the work style that places importance on the amount of time spent working, an orientation created by men. We will press forward in reviewing the system of labor that gives consideration to the work-life balance, creating a society in which women shine.
(2. Non-Japanese brimming with ability)
We must completely do away with inward-focused ways of thinking. Turning our eye to the world beyond Japan, we find a great number of non-Japanese who are brimming with ability. I wish to have such people more actively engaged within Japan. Last month, we also began creating a new system to achieve that.
This year I visited Abidjan in Côte d'Ivoire. There, girls who had been unable to attend school because of poverty were receiving assistance from Japan and learning how to read and write along with training in needlework. Their eyes shone as they sat in front of sewing machines Japan donated. I believe that the day is not far off when a world-famous designer like Coco Chanel will emerge from among these girls.
In Phnom Penh, which I visited last year, a maternal and child health center called the “Japan Hospital” has reduced the infant mortality rate by half. Children will surely be the ones who carve out Cambodia’s future.
At the Tokyo International Conference on African Development that Japan hosted, one African leader said to me, “It is the Japanese companies that have taught us what it means to work, along with morals in the workplace.”
Overseas as well, Japan’s approach has been to foster young people and women and grow together with them. Japan must become a place of hope, overflowing with opportunities for those who are interested in Japan and wish to demonstrate their ability there.
(3. The venture spirit)
Furthermore, Japan must be a country where even people who have failed once have ample opportunities to succeed.
The people with the highest ability to succeed are those who once failed. In Silicon Valley, those who have the experience of failing are highly evaluated by investors. This is because those who have failed understand what they need to improve upon.
I can be completely certain of this, speaking as a Prime Minister who failed once but is now serving a second tenure.
I am working to eliminate the custom that entrepreneurs have to personally guarantee the debt of their companies, a practice peculiar to Japan that does not allow second opportunities to those who have failed. I will change Japan into a nation overflowing with the venture spirit, where everyone can enjoy a number of opportunities to succeed.
We must go beyond the male viewpoint and fuse perspectives unique to women and foreign culture and the experiences of those who have failed.
We should create a “bento-style” economic structure that draws forth the potential of all individuals to the greatest possible extent. That will surely lead us to the sustained growth in the 21st century.
5. In conclusion: The OECD Tohoku School project
Gravity is not absolute. Human beings can escape even from the restraints of gravity.
It was 230 years ago that two courageous Frenchmen proved this admirably, at this very place.
It was in the gardens here at the Château de la Muette that the hot-air balloon crafted by the Montgolfier brothers achieved the first-ever manned flight in the history of humankind.
Allow me to introduce here an essay penned by a Japanese high school student.
We have to move forward.
We have just watched the uneasy faces of our parents and other adults.
What can we do now?
What must we do for the sake of our beloved Fukushima?
In Japan’s Tohoku region, people lost their beloved family members, their homes, and their hometowns as a result of the Great East Japan Earthquake three years ago.
However, they can certainly rise up again by themselves, even from these difficulties. It is what the children stricken by sorrow and grief have realized, thanks to the OECD Tohoku School project. After 230 years, the gardens of the Château de la Muette have given courage to the youth of the disaster areas.
Two high school students from the disaster-stricken areas who are participating in the OECD Tohoku School are here with us today. Now, I can see the cheerful faces of Ms. Yoko Tsurimaki and Mr. Kohei Oyama over there.
I would like to join these two students in taking this opportunity to express my heartfelt appreciation once more for the warm assistance that was given to us by the OECD and others in the international community in the wake of the great earthquake.
These students in the OECD Tohoku School will hold a festival in the Parc du Champ-de-Mars in Paris this summer as the culmination of the school’s endeavors over these three years. I very much hope that you have the opportunity to feel the enthusiasm of the young people in the disaster areas towards reconstruction.
The future will surely be bright, so long as young people do not lose hope. I firmly believe that. This is not limited only to Japanese young people. It is equally true for the girls I met in Abidjan learning at their sewing machines as well as the children I met in Phnom Penh whose lives were saved at the maternal and child health center.
When we empower people so that everyone is able to bring into full bloom his or her potential there will surely come a resilient world that will never be undermined, no matter what crisis it may face.
Abenomics is the answer that Japan has provided to these two themes being taken up at this Ministerial Council Meeting, “Empowerment” and “Resilience.” I very much look forward to active discussions, leading to concrete outcomes.
Surely, we can change the world. The Château de la Muette is a place that will continue to bolster our confidence for change throughout the world. Japan is ready to demonstrate notable leadership in these efforts.
Thank you for your kind attention.