Statement by Prime Minister Kishida at PRI in Person 2023
October 3, 2023
A pleasure to meet you all. To all our distinguished investors, as the Prime Minister of Japan, I would like to extend a warm and wholehearted welcome to Japan. It is a great pleasure to host in Japan "PRI in Person," a forum of leading investors who are driving global responsible investment. Let me express my sincere respect for the efforts of the PRI Secretariat and everyone working hard for organizing this precious opportunity.
Two weeks from September 25th to October 6th are what we call "Japan Weeks." Centering on PRI in Person, the weeks consist of a number of opportunities for discussions on global sustainable finances and investments. They are also excellent opportunities to demonstrate major changes taking place here in Japan, in particular, public and private sectors’ efforts to tackle social challenges and achieve sustainable growth.
Tackling social and environmental challenges such as climate change and generating sustainable growth require unlocking fundamental strength of finances.
Japan has more than 2,100 trillion yen, or $14 trillion, in household financial assets, most of which are owned as savings. I am pushing forward a policy package to channel these huge assets from savings into investments, which I believe will contribute to sustainable growth not only in Japan, but also on a global scale.
In addition to climate change, Japan truly faces various social issues including aging population and severe natural disasters. However, I would like to emphasize that these diverse social challenges can be at the same time the potential for growth. As the Japanese have long said, 'a disaster could better be turned into an advantage.' Aging population is a challenge many countries face, now or in the future; effective response to natural disasters is increasingly urgent on a global level due to the evidently more severe impacts of climate change. Japan, as one of the front-runners facing social and environmental challenges, is committed to actively sharing our experiences and outcomes with global communities to tackle the world’s challenges.
The key is the power of science and technology in enterprises.
One startup founded by young Japanese researchers who learned information and communication engineering in the University of Tokyo, for example, has leveraged traditional printing technology for electronic circuit boards and created a product that cuts metal usage by 70%, reduces CO2 emissions by 75%, and minimizes water usage by 95%. These groundbreaking technologies are vital in effectively addressing social challenges. Once implemented, they have the potential to aid people worldwide who struggle with similar issues for that reason, and at the same time open up substantial market opportunities.
Here are four major Japanese policy priorities that will help solve the world's problems and encourage corporate activities and investments that will achieve sustainable growth.
Firstly, investing in what we call green transformation, or GX for short. Changing the industrial and social structure to shift away from fossil fuels to one that is oriented towards clean energies is a great challenge, but also an opportunity for growth.
In order to raise over 150 trillion yen, or $1 trillion, of public and private financing over the next 10 years to achieve net-zero in 2050, the Government of Japan published the GX Promotion Strategy this July, including the implementation of carbon pricing.
Foremost, the Japanese government will issue new government transition bonds named “Climate Transition Bonds” this fiscal year. These bonds will be the world’s first government-issued transition bonds aligned with global standards. This will enable 20 trillion-yen, or $130 billion, worth of advance investments that has a clear strategy and innovativeness, catalyzing private investment for the research, development, and implementation of innovation towards the accelerated uptake of renewable energy, new energy sources such as hydrogen, and industrial facilities and equipment in industries such as steel, chemicals, and automobiles.
Technologies developed by Japanese businesses will contribute to global emissions reductions, and we will lead global rulemaking for visualizing avoided emissions.
We have been strongly promoting transition finance, and the introduction of “Climate Transition Bonds” will pave the way for further promotion. Transition finance, which leads the whole-of-economy transition, is crucial for transforming the world, and its importance was highlighted at the G7 Hiroshima Summit this May.
Furthermore, we aim to develop GX-related investment products that will appeal to a broad spectrum of investors, from Japanese retail investors, who can use expanded and permanent NISA, the tax exemption scheme for small investments, to global investors. I believe this will contribute to realizing a world where both global investors and investee companies, including those from developing countries, actively participate in green transformation.
From this viewpoint, let me announce that the Financial Services Agency of Japan will within this year establish a "Dialogue on Enhancing Sustainability Investment Products," as an initiative for fostering GX and ESG investment by both individual and institutional investors.
Moreover, Japan shall contribute to achieving global Net Zero in cooperation with peer Asian countries. In order to encourage specific implementation cases of transition finance that fit and leverage the strengths and attributes of each country, Japan will launch an “Asia GX consortium,” in collaboration with the "GFANZ Japan Chapter" by the middle of next year. This consortium will drive GX investment in Asia, involving the public and private sectors.
A second policy priority is to support startups dedicated to addressing social challenges. Startups, I believe, act as catalysts, turning social issues into levers of growth; now-iconic manufacturing companies that bolster Japan's technology all started as startups, founded by young professionals in their 20s and 30s after the World War II.
Our government has assembled “Startup Development Five-year Plan,” positioning 2022 as the inaugural year for fostering startups that aim to contribute to resolving global challenges, and spearhead growth both in Japan and worldwide. Our aim is to amplify investments tenfold, reaching 10 trillion yen, or $70 billion, within five years.
An essential driver of promoting such investment is "impact investment." This investment focuses "impact" on addressing social and environmental challenges and fosters specific technologies and business-model innovations that contribute to tackling the challenges. So, the commitment of investors to driving transformation is essential. The JFSA has been crafting "Basic Guidelines on Impact Investment" and is on track to establishing Consortium by year-end, with public and private stakeholders in cooperation. Japan is keen to lead fundraising that enables social changes.
In fact, we have seen a number of emerging and promising impact startups across various issues, both in Japan and abroad, including decarbonization, water resources, and healthcare. I aspire to further bolster this trend by creating an investment-friendly environment and collaborating with global stakeholders, so as to develop impact investment into an established approach and market. The Impact Consortium, set to launch this year, is open to world and let me invite participation by global investors and stakeholders.
With respect to healthcare, for instance, we have initiated the “Impact Investment Initiative for Global Health,” which was endorsed by the G7 Hiroshima Summit. This initiative was launched on the occasion of the recent UN High-Level Meetings. Collaboratively with development partners and private investors, we are committed to addressing the needs of the Global South.
A third priority centers on enhancing human capital. This involves human resource development including re-skilling, significant budget expansions to support all children and all households with children, and a concerted effort to promote women. Enhancing human capital is a top priority not only for Japan but also for the world.
Expanding investment in human capital is indispensable in increasing corporate value in the mid-to-long-term, and dialogue between companies and investors is fundamental. To this end, listed companies in Japan have been required to disclose their human capital related information since the fiscal year ended March 31, 2023.
Furthermore, we are committed to contributing to the work on the development of international disclosure standards such as those on human capital in order to meet investors’ interests in information about investment in human capital.
Finally, strengthening the functioning of finance that encourages sustainability outcomes. Japan has more than 2,100 trillion yen, or $14 trillion, in household financial assets, of which about 530 trillion yen, or $3.6 trillion, is largely managed by asset managers and asset owners as insurances and pensions. In addition, the GPIF, which manages public pensions, has one of the largest assets in the world at about 220 trillion yen, or $1.5 trillion.
To achieve a sustainable society, it is vital to increase investments targeting companies that address social challenges while encouraging others to follow suit.
To realize this vision, strengthening the ability of asset managers and asset owners is key, because they are in charge of managing the long-term funds of individual end-investors.
To this end, I will design a new plan by year-end to realize asset management businesses. This Policy Plan would be aimed at: further sophistication of asset management; improvement in the governance of asset managers and owners; soliciting new entrants; and promoting the competition.
Addressing social challenges through investment would encourage companies to drive change, enhance sustainability of our economies and societies, as well as harness growth potential of our world. This would, in turn, provide long-term financial opportunities to both investors and the beneficiaries who entrust their funds to the investors. This approach of responsible investment is something that would precisely embody elements of what is generally called “fiduciary duty.”
In this regard, increasing numbers of signatories to the PRI is highly meaningful. As a strong driver of responsible investment, the initiative enables asset managers and owners to engage in dialogues with companies and promote growth and sustainability outcomes. In Japan, although many financial institutions including GPIF have already embraced PRI, I would expect further more to come to join the movement. In order to accelerate this trend, I hereby announce that as the government we would proceed with necessary background work, and that seven representative public pension funds, worth of 90 trillion yen, or $600 billion in AUM, will start preparations for newly becoming signatories to the Principle for Responsible Investments. Our objective is that public pension funds reinforces their work on sustainable finance and spread the movement to the whole financial market.
Collaborative efforts by businesses and finances to unleash their immense potential to create substantial impacts, reshape society, and foster sustainable and solid growth: this idea exactly aligns with the principles of the "New Form of Capitalism," which I keenly advocate.
Supporting and investing in innovation, encompassing transition finance and impact investing, are no longer mere philosophies. They are already at a crucial implementation phase. These endeavors drive both problem-solving and growth. The Government of Japan is committed to translating these intentions into actions in collaboration with you, global investors.
Thank you for your attention.