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On December 26, 2017, Prime Minister Shinzo Abe attended a Meeting of Councillors of Keidanren (Japan Business Federation) held in Tokyo.

The Prime Minister said in his address,

“Today actually marks exactly five years since the inauguration of the second Abe Cabinet. In other words, today is the fifth anniversary of Abenomics. I am delighted that, on this truly auspicious day, I have been invited to attend this annual Meeting of Councillors of Keidanren. I am sure it is completely by chance. I would nevertheless like to express my gratitude.

During these five years, we have placed top priority on the economy, and exerted our full efforts in various reforms, such as corporate tax reform and corporate governance reform. As a result, Japan’s economy has shown positive growth for seven consecutive quarters. Given that such a level of economic expansion has not occurred since the January-March 2001 quarter, I believe, we are seeing such strong level of growth for the first time in this century.

We have also witnessed a major shift from negative business sentiment before the change in government to positive business conditions. In the recently released Short-Term Economic Survey of Enterprises in Japan (Tankan) of the Bank of Japan, business conditions for large enterprises and manufacturing were at the highest level since December 2006 before the global financial crisis.

December 2006 was indeed during the first Abe administration, not that I am boasting. I would also like to note just in case that, looking back, at that time too, Japanese companies registered record high earnings. So the economy is the best it has been in 11 years.

Meanwhile, when looking at companies of all sizes, including small and medium enterprises (SMEs), and all industries, the economy is in fact the best it has been for an even longer period. We are actually seeing such a strong economy for the first time in 26 years since the economic bubble. This means that currently business sentiment is good not only at large enterprises but also at SMEs. This is the major difference from 2006.

Under Japan’s prolonged deflation, in particular, SMEs in the non-manufacturing industries, such as the service industry, have consistently recorded negative business sentiment in the Bank of Japan’s Tankan for more than 20 years after the collapse of the bubble economy. However, business sentiment has become positive with Abenomics and has basically remained positive for almost three years.

In other words, while at first glance the current economic recovery appears the same as that at the time of the first Abe Cabinet, of course it looks the same as the Prime Minister is also the same, in substance they are totally different. The wave of economic recovery is not limited to large enterprises and manufacturing, and is also spreading to SMEs and enterprises in the non-manufacturing industries. The positive economic cycle that Abenomics has been aiming for has truly come into being during the last five years. I believe this is a testament to the widespread economic recovery.

When we look at employment and wages, the difference between now and 2006 is even clearer.

Although the overall ratio of active job openings to applicants was slightly over 1.0 in 2006 as well, it was around 0.6 in Hokkaido and in Aomori, Kochi, and Okinawa, the ratio was only a little over 0.4. The situation was severe in prefectures. Now, the ratio exceeds 1.0 in all 47 prefectures, in every corner of Japan. Such a national improvement in the employment situation was not seen even during the period of rapid economic growth. Under such circumstances, the ratio of active job openings to applicants for regular employees, which was around 0.6 in 2006, currently exceeds 1.0 for the first time since statistics began to be kept.

In regard to wages, an increase of about 2% has been achieved annually for four consecutive years according to a survey by the Japanese Trade Union Confederation (RENGO). It also exceeds that of around 2006, and is the highest level in this century.

As a result of the economic recovery, anyone can work if they have ambition. And if they work hard, their wages will rise. This will lead to further increases in investment and consumption. The warm winds of economic recovery will reach SMEs and small businesses and members of the service industry, creating the next round of economic growth. This positive economic cycle is the driving force of the economic recovery through Abenomics. First, I would like to take this opportunity to express my profound gratitude to all the members of Keidanren for the expansion of employment and wage increases over the last five years.

Having said that, as this intuitive audience has probably have begun to notice, in order to soon realize an exit from deflation, which is a longstanding issue, we must continue to make this positive economic cycle even more powerful in 2018 as well. To that end, I would like to make one request. I am very sorry to make similar remarks every year, but I would like to request Chairman Sakakibara, Chairman of the Board of Councillors Iwasa, and all those in attendance here today to please continue to carry out a strong wage increase next spring, namely, a wage increase of 3% or above.

Oh, it has suddenly become very quiet. Anyway, of course, in order for companies to carry out a wage increase, it is necessary to increase labor productivity. To that end, the Government has raised the new flag of a revolution in productivity, and has decided to mobilize a variety of policies such as taxation, budget, and regulatory reforms.

Proactive investment in innovations, including artificial intelligence (AI), Big Data, robots, and IoT, promote a major transformation in business models, beyond bringing about more than just greater efficiency and labor-saving. By directly linking with the potential needs of individuals and companies, unprecedentedly innovative businesses and services are now steadily being developed all over the world.

By creating completely new added value in the era of Society 5.0, we will dramatically raise productivity. By 2020, Japan will realize, ahead of the rest of the world, this kind of a revolution in productivity that will be comparable to previous industrial revolutions. We recently compiled a policy package to achieve this. We will establish a regulatory sandbox to be able to take on new business challenges with innovative ideas without being bound by current regulations.

For companies that carry out a wage increase of 3% or more and, to that end, thoroughly make investments, we will decrease the corporate tax burden to the OECD average of 25%. In addition, for companies undertaking bold endeavors in adopting innovative technology, it will be dropped to 20%. Nowadays, the taxation reform in the United States has been a topic of interest. However, even if the federal tax drops to 21%, there is also the state’s corporate tax, so the total is a corporate burden of about 28%. The Abe Cabinet has reduced the corporate tax rate by 7% over the last five years, achieving the rate under 30%. Moreover, in the tax system aimed at this revolution in productivity, we will further reduce the corporate tax burden including national and local taxes to 20% at once. This is truly a revolutionary policy. To this end, Minister of Finance Aso made a bold decision, jumping down from the renowned high-rise stage at Kiyomizu Temple in Kyoto, but with a parachute.

At the same time, though this probably does not apply to any of you in attendance today, there may be companies that have achieved record-breaking earnings but are reluctant to invest in equipment or human resources. If we find such companies, we will stop preferential treatment for them, including tax reduction for research and development. Our methods of placing focus are also revolutionary.

What is needed now is a more aggressive approach in management. ‘If you want to protect yourself, there is no choice but to attack.’ These are the words of Yoshiharu Habu, the only individual ever to simultaneously hold seven major professional shogi (Japanese chess) titles. These words resonate with me this year. I hope that all of you will completely rid yourself of a deflation mindset next year, and make use of this opportunity to pursue the challenges of making bold investments for productivity improvement.

Next year the work style reform will be the biggest political topic. With cooperation from the members of Keidanren, and based on the agreement of both the business community and labor, for the first time we will introduce regulations on long work hours that come with penalties. Securing a work-life balance in itself is a powerful weapon for a revolution in productivity. In order to both shorten working hours and advance work style reform, it is necessary to make capital investments aimed at improving labor productivity. I would like to make next year the first year of Japan’s revolution in productivity by realizing the trinity of proactive and bold investment, work style reform, and a wage increase of 3% or more.

In Japan, where the declining birthrate and aging population are rapidly advancing, we will also advance a revolution in human resources development along with the revolution in productivity. We will be able to fully unleash the potential of each and every Japanese individual. Creating that kind of society is an urgent issue.

In order to take on the challenges of the major reforms, this year we also accepted the challenge of dissolving the House of Representatives and having a general election. We received the confidence of the people, and along with reviewing the uses of the consumption tax, with the strong cooperation of the business community, we have decided to boldly invest in our children’s futures, including making early childhood education free, using the permanent source of funds of two trillion yen. I would like to take this opportunity to once again express my gratitude for your cooperation.

Further, towards next summer, we will advance consideration of enhancing recurrent education (continuing education) through the use of the employment insurance system, and are determined to conduct major reform of Japan’s social security system to orient it to all generations.

This month the Japan-EU Economic Partnership Agreement (EPA) was concluded after nearly five years of negotiations. Last month, the TPP11 reached an agreement at the ministerial level. An economic zone based on free and fair rules will be expanded across the world. This offers a major opportunity for Japanese companies that provide high quality goods and services.

With our major goal being 2020, when the Olympic and Paralympic Games will come once again to Japan, we will conduct major socioeconomic reforms in Japan. I believe that, having our sights on the future, this year we have made a major step forward towards building a new country. When the New Year arrives, it will be 2018, leaving only two more years. We do not have much time to spare. Therefore, next year we will continue to persistently pursue reform, reform, and reform.

As the market adage goes, ‘the years of the monkey and the rooster are years of upheaval, while the year of the dog is a year of laughter.’ I will not go into too much detail, but this past year, the Year of the Rooster, was certainly a year of upheaval for me. I truly hope that next year, the Year of the Dog, will be a year that brings laughter throughout Japan. I wonder if, in fact, at this Meeting at the end of next year, we will all really be smiling. I believe that depends on to what extent, both the Government and the business community boldly tackle the challenges of reforms over the next year. In the coming year, let us both work hard. I would like to conclude my remarks by expressing my wish that next year, the Year of the Dog of laughter, will be a wonderful one for all of you. Thank you very much for your invitation today, and also for your kind attention.”