I thank you for inviting me to the 62nd meeting of the Keidanren Board of Directors and to say a few words.
1. Looking Back on 2008
At this time in December, throughout the mass media we see the same types of television shows and other offerings looking back on the past year. It's not surprising that many of these stories dwell on the negative, but this year, even in the midst of such gloom there was also a good deal of positive news.
Take the Beijing Olympics, for example. I think that there were many among business managers who were greatly moved as they watched the furious pitches thrown by [Yukiko] Ueno of the [Japanese] softball team. I believe that a great number of people were encouraged at the sight of her continuing to pitch and finally emerging victorious.
In addition, four Japanese scientists won the Nobel Prize this year, also an entirely unprecedented achievement.
Despite this, it must be said that 2008 was a difficult year for the business sector. The first half of the year saw an upsurge in the prices of natural resources. And in the latter half came a global financial crisis originating in the US.
I suspect that 15 September 2008 is a date destined to appear in many history textbooks. We are now engulfed by two foreign-born "tsunamis". I think this sums up 2008.
However, I remain confident that Japan should be and will be the first country able to extricate itself from recession.
2. Japan's Role
We first need to bear in mind that it was not that there were structural problems with the Japanese economy itself. This is a big difference with the last recession, when Japan was shackled with "three excesses" from the past, such as excess capacity. Chairman Mitarai earlier provided a report on the G8 Business Summit meeting. As I'm sure Mr Mitarai felt as well, overseas expectations towards Japan are extremely high.
Every time I attend an international conference-the Asia-Europe Meeting in Beijing, the Financial Summit in Washington D.C. and APEC in Lima, among others-many leaders eagerly solicit the views of Japan. They ask me about our experiences after the bursting of the bubble, and in 1997 and 1998. The Asian financial crisis is something Japan weathered entirely by itself. They also ask me about economic strengths of Japan, the second largest economy in the world. It must be these factors that have created expectations towards us.
The world economy has just started moves to create a new order from the confusion of the financial crisis. In this situation Japan must exert leadership which fully lives up to such expectations.
3. Countermeasures for the Economy
In the near term, as Chairman Mitarai has also stated, economic countermeasures need to come before all else. Bold measures are required to confront a crisis said to occur once in a century. Abnormal economic situations obviously demand exceptional responses.
Japan was the first in the world to introduce economic countermeasures. It has taken a string of measures in succession, with the first supplementary budget [of fiscal 2008], the "Countermeasures to assist people's daily lives" at the end of October, and the "Emergency countermeasures to defend people's daily lives" determined at the end of last week.
The total of fiscal spending and tax reductions in these sets of measures amounts to 12 trillion yen. This sum is equivalent to 2 percent of Japan's gross domestic production (GDP). This drastic scale exceeds that of measures by either the United States or the United Kingdom. And together with financial measures, the total reaches 75 trillion yen.
There are two central elements in these countermeasures: assisting with employment and assisting with companies' cash-flow.
3-1. Countermeasures for employment
First, with regard to employment, I recently asked representatives of the Keidanren to visit me at my office and asked them to do what is possible for stable employment. Jobs have a direct impact on daily life. They provide people with their bread and butter. If one is anxious about one's job, one's purse strings will obviously be tighter. Providing stable employment will reassure people in their daily lives and lead to more consumption. We could even say that doing so amounts to corporate social responsibility.
Though difficult, I believe that defending jobs and people's daily lives will turn economy activity back into a virtuous cycle. For this reason, the business sector and the government should make their utmost efforts, working in tandem, to achieve the common goal of defending employment and people's daily lives.
The "Emergency Measures to defend people's daily lives" formulated last week include strong support to companies and municipalities in conducting their own initiatives in this regard.
An ordinary session of the Diet shall be convened on 5 January, in order to have the second supplementary budget and the principal budget for fiscal 2009 approved, and in turn to implement these countermeasures for employment whose scale is roughly one trillion yen. I call upon those in the business community by all means to take advantage of these measures and help to provide job stability.
In particular, the most desperate problem now at the end of the year is the plight of those who are in danger of losing their place to live. I ask that they at least be allowed to stay in their corporate dormitories [even if their jobs have been terminated]. The government is providing subsidies in this regard. I take this opportunity to make this request to all of you.
(Countermeasures against cash-flow problems)
The second element deals with the cash-flow of companies.
As for countermeasures against cash-flow problems faced by micro, small and mid-sized enterprises, we have taken active measures over the past month and a half, such as the extension of 110,000 emergency credit guarantees covering a total of 2.7 trillion yen. Yet I am aware that securing financing is becoming suddenly difficult for large and second-tier companies as well. Now is precisely the time for government action, as the market is struggling to function. Crisis measures, totalling three trillion yen, have been prepared, consisting of the purchase of commercial paper (CP) by, and loans from, the Development Bank of Japan and the Shoko Chukin Bank.
Bank of Japan Governor [Masaaki] Shirakawa is with us here today. I believe that the Bank of Japan has also been forthcoming with bold steps. We will also take all possible measures to facilitate financing on the part of second-tier and large companies.
4. Growth strategy
In addition to such countermeasures in the near term, a growth strategy is important for the longer-term future. Included in the "Measures to counter difficulties in people's daily lives" are new systems to enable the complete depreciation of energy-saving facilities in the same (first) year as their introduction-this is unprecedented-as well as systems to make it possible for companies to return profits gained by their overseas subsidiaries back to Japan without incurring taxation.
In addition, the world is undergoing a paradigm shift, seen in such forms as greater constraints concerning natural resources and the environment, as well as excesses and reversals in the financial and capital markets.
We will formulate growth strategies in the medium and long terms bearing in mind such paradigm shifts. First, the public and private sectors shall invest boldly in strategic fields such as the environment and regenerative medicine, reform systems that are obstacles and develop the required infrastructure.
For example, while one tends to think of environmental issues as a constraint, I believe that they provide a new growth opportunity. Japan has world-leading environmental and energy-related technologies. I strongly hope Japan can be the first in the world to become a low-carbon society which is compatible with growth, by increasing the use of these technologies.
Second, we must proceed with initiatives to expand growth in Asia and promote domestic demand. Expectations are high that Asia should underpin world growth as the "the world's growth centre". In my view, it is imperative that there should be responses concerning the real economy to follow those in finance.
Japan needs to play an active role in such efforts to build major industrial arteries that support the transborder flow of goods, and which consists inter alia of seaports. Meanwhile it needs to develop a safety net concerning social security and to increase domestic demand by reforming the agricultural sector. I have appointed special envoys of the Prime Minister to hold consultations with various Asian countries on these matters.
Day after day the news is filled with reports on the difficult economic situation. Yet we must not let our spirits flag, keeping in mind that the kanji for "spirit"-ki-is half of the Japanese word keiki, or "economic activity". Otherwise we will fall into a vicious circle. There is no tunnel without an end.
We rose from the ashes of war to build the second largest economic power in the world. After both the oil crises and the Plaza Accord, which brought the collapse of the US dollar from 240 yen per dollar to 120, Japan re-engineered its domestic systems and structures, always rising again, like a phoenix. That is Japan's history over the past 60 years. We should have stronger confidence in our country.
Japanese-style business management supported this miraculous development. Examples of its fortes lie in a management approach which takes good care of human resources and in an emphasis on manufacturing capability. So long as you among the business community do not forget these basics I am confident that Japan will be the first in the world to extricate itself from the current global recession. I am firmly convinced of this.
So, how should we expend our efforts to achieve this? Finding the right policies and systems is the responsibility now being thrust on the government.
Next year, as in other years, I will be concentrating from the beginning on just one thing-translating various economic countermeasures into action. And I hope to make it possible for all of you to look back on the year in high spirits when you gather here again at the end of next year. I ask for your cooperation so that this goal can be achieved.