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Ongoing Topics

Outline of Emergency Proposal Toward the Launch of a "New Form of Capitalism" that Carves Out the Future

November 8, 2021

November 8, 2021
Secretariat of New Form of Capitalism Realization Headquarters, Cabinet Secretariat

I. Vision Toward the Launch of a New Form of Capitalism
 
The Government has set up in the Cabinet the New Form of Capitalism Realization Headquarters in order to realize a new form of capitalism based on the concept of a virtuous cycle of growth and distribution and developing a new post-COVID-19 society. Under the Headquarters, a Council of New Form of Capitalism Realization has been established to shape a vision toward the realization of a new form of capitalism and translate it into concrete measures. Discussions in the council began on October 26, 2021.
 
At present, there is a growing trend around the world to step up efforts to build a new form of capitalism that is focused on sustainability and people to generate new investment and growth. Japan aims to take the lead in this initiative with sustainability and human capital as its focal point.
 
Specifically, since the 1980s, a growing emphasis has been placed on short-term shareholder value, resulting in a sluggish growth of the middle class, widening disparities, an increasing burden on subcontractors and adverse effects on the natural environment and others. Thus, the government, the private sector, universities, local communities, and citizens and consumers should all play their respective roles to solve pending issues. Private companies are requested to enhance their mid- to long-term earning power by strengthening their investment in the future in areas such as human capital, and to achieve sustainable growth by circulating the profits through wage increases and other distributions as well as through further investment in the future. We are committed to building a sustainable capitalism focused on various stakeholders, leading to the happiness of a wide range of people, including frontline employees and subcontractors. While our basic principle is to realize economic growth by utilizing market functions, it is also important for the public and private sectors to work together to create an economy for a new era with the government providing supplementary response in areas that are not sufficiently addressed.
 
In doing so, it is important to establish an environment for assessing the quality of growth and long-term corporate value by visualizing human capital, intangible assets and respect for society, the natural environment, and human rights.
 
Due to the COVID-19 pandemic, the mindset among people about their workstyle and lifestyle has changed. People are becoming more conscious of a concrete sense that society is going to change, such as with digital transformation, which until now had not proceeded very far, suddenly making rapid progress. Now is the time to reform conventional socio-economic practices and restrictions as well as institutions to build a new society premised on the coexisting with COVID-19.
 
As a trigger for a virtuous cycle of growth and distribution, it is necessary to realize growth in the first place. We need to promote efforts to realize a science and technology nation, including those for digital transformation (DX) and growth of the green sector toward a solution to the climate change, thereby drastically strengthening our capacity for innovation. The principle here is for the private sector to initiate innovation and for the public sector to support it. There are high hopes for startups as the driver of innovation that will carve out the future of Japan. By providing thorough support for startups, we aim to create a second entrepreneurial boom following the one immediately after the end of World War II. It is also important to use innovation to solve social issues in a bid to create a highly convenient society and to promote improvement of productivity in a wide range of industries and enterprises, including SMEs, subcontractors and startups in local regions, thereby helping create a prosperous middle class. Further innovation should be encouraged not just for products, but also for services.
 
Based on such initiatives, consumption is expected to increase through distribution to employees in the form of wages, which then stimulates demand, leading to improvement in corporate earnings and sustainable growth. In light of Japan’s percentage of distributions allocated to labor, which is lower compared with those of other developed nations, our distribution strategy serves as an important foundation for growth. In working on this initiative, given that worry about the future gives rise to restrained consumption and it has become a hindrance to economic growth, it is necessary to dispel people’s anxiety about the future by promoting the building of a social security system oriented to all generations, along with a path to increase incomes through economic growth.
 
In order to realize growth and distribution at the same time, it is necessary to strengthen investment in people through efforts ranging from those in early childhood education as well as childcare and at elementary and junior high schools to those within enterprises. We must respect diversity and inclusion for the purpose of creating a society where all citizens can participate and play an active role, including women, young people, non-regular employees and those in local regions, while establishing an environment where each individual can create added value. It is also necessary to create a society where people can start over and no one is left behind through the introduction of recurrent education and safety nets. There is a need to tackle labor market reforms and educational issues, including by establishing the practice of merit-based evaluation and treatment of workers. Furthermore, in order to resolve the issue of the rapidly aging population, it is necessary to strengthen measures to address the declining birthrate, including support for child-rearing.
 
From such perspectives, Japan should mobilize all possible policies toward the realization of a virtuous cycle of growth and distribution that will then achieve subsequent growth, with the government, the private sector, universities, local communities, and citizens and consumers playing their respective roles. To this end, it is essential to increase productivity through our growth strategy and to distribute the fruits of that growth in the form of wages to working people, thereby raising the income level of a broad range of citizens.
 
Based on these basic ideas, the Council of New Form of Capitalism Realization should shape a vision and formulate measures to materialize it with a view to taking the initiative in sending them to the international community. In formulating the measures, we will sit down with a small group of people as needed and carefully listen to the voices of various people concerned as we examine the matter. At the same time, information on the progress and direction of discussions should be shared as appropriate between the Council and the experts in relevant councils, etc. to ensure that the transformation toward a new form of capitalism will be more effective.
 
This urgent proposal outlines the measures that the Kishida Cabinet should immediately tackle with the utmost priority in order to implement what needs to be promptly implemented for the launch of a new form of capitalism.
 
II. Growth Strategy
 
1. Promotion for the realization of a science and technology nation
(1) Strengthening investment in science/technology and innovation to promote the realization of a science and technology nation
a. Establishing a university fund at a scale of 10 trillion yen and implementing university reform
b. Research/development and demonstration of advanced science and technology, including in the areas of digital, green, artificial intelligence, quantum, bio, and space
c. Strengthening efforts in the area of life science
 
(2) Promotion of Digital Transformation (DX)
a. Promotion by the Digital Agency of data utilization in the areas of health, medical care, nursing care, education, etc.
b. Promotion of Data Free Flow with Trust (DFFT)
c. Establishing an environment facilitating cashless payment by bringing transparency to fees
d. Wider use of contents
 
(3) Development and implementation of clean energy technology
a. Wider introduction of renewable energy
b. Promotion of electrification of automobiles and business restructuring through establishing domestic production of storage batteries, development of hydrogen stations and recharging facilities and promotion of electric vehicles
c. Fuel conversion in energy-intensive industries such as those of chemicals and steel
d. Decarbonization in the housing and building sectors by improving the energy-saving performance of existing houses and buildings and promoting wooden buildings
e. Promotion of research and development of new technologies for the future use of nuclear energy, such as nuclear fusion
f. Formulation of a clean energy strategy
 
2. Revival of the dynamism of Japanese companies and comprehensive support for startups as the driver of innovation
(1) Promotion of the commercialization of element technology into products and services

(2) Promotion of the creation of new products and services with high added value

(3) Establishing an environment that enables the creation and expansion of startups

(4) Examination of the Initial Public Offering (IPO) Process Reform and the SPAC (Special Purpose Acquisition Company) listing framework

(5) Support for an open innovation with large enterprises

(6) Strengthening competition policy to promote fair competition

(7) Promotion of transparency and fairness in the digital advertising market
 
3. Launch of a Vision for a Digital Garden City Nation to revitalize rural areas and connect them to the world
(1) Implementation of digital technology such as telework, drone delivery and automated delivery beginning with local regions

(2) Comprehensive and integrated promotion of DX for regional enterprises by SMEs, regional financial institutions

(3) Promotion of the so-called 6G (Beyond 5G)

(4) Development of an ICT environment for education

(5) Establishing a Council for a Vision for a Digital Garden City Nation Realization and a Digital Extraordinary Administrative Advisory Committee

(6) Active investment in infrastructure development for regional revitalization
a. Promotion of the transformation of agriculture, forestry and fisheries into growing industries and the preservation of the multifunctional role performed by family farming and by farming in hilly and mountainous areas
b. Promotion of a five-year plan for accelerated measures to prevent and reduce disasters and to enhance national resilience, and development of transportation and logistics infrastructure to support a prosperous Garden City Nation
c. Promotion of PPP/PFI
d. Facilitating preparations for Expo 2025 Osaka Kansai
e. Support for the tourism industry to revive Japan as a tourism-oriented country
 
4. Economic Security
(1) Formulating legislation to promote economic security for securing Japan's autonomy, superiority, and indispensability

(2) Promotion of initiatives to identify strategic technology and goods/materials, to foster technology and to prevent outflows of technology

(3) Support for international joint development of advanced semiconductors, which are the foundation of the digital society, support for inviting advanced semiconductor factories to Japan, and renovation of domestic base factories

(4) Promotion of decentralization and optimal deployment of next-generation data centers
 
III. Distribution Strategy: Strengthening investment in people that will bring security and growth
 
1. Support for strengthening distribution in the private sector, including cases on a medium- to long-term basis
(1) Fostering momentum for raising wages in accordance with the business environment against the backdrop of a new form of capitalism

(2) Eliminating wage disparities between men and women

(3) Strengthening support within the tax code for companies that raise wages in an effort to increase the percentage of distributions allocated to labor

(4) Facilitating labor mobility and strengthening investment in human capital

(5) Strengthening distribution to non-regular employees, etc.
a. Enactment of new legislation to protect freelancers
b. Facilitating labor mobility for non-regular employees under difficult circumstances
c. Ensuring equal pay for equal work between regular and non-regular employees, raising the minimum wage in accordance with economic conditions, and work style reform
 
(6) Strengthening supervision and encouraging industry to ensure proper business transactions, aiming to achieve coexistence and co-prosperity between large companies and SMEs
 
(7) Establishing an environment for business restructuring and business revitalization
a. Support for business continuity, business restructuring and productivity improvement of SMEs
b. Enactment of legislation to facilitate voluntary liquidation to promote business restructuring for businesses that are expected to recover profitability
c. Formulating guidelines for voluntary liquidation of SMEs, etc.
 
(8) Examination by the Government Tax Commission of the future vision of the tax system in the era of a new form of capitalism
 
2. Strengthening the distribution function in the public sector
(1) Fundamental review of the state of public prices
a. The state of public prices that will help increase the income of those working at facilities providing medical nursing, elderly care, childcare services and the like
b. Examination of government procurement methods for raising wages
 
(2) Support for children and child-rearing activities
a. Examining the state of the administration from the perspective of children                                                   
b. Promotion of support for child-rearing, such as preparing childcare arrangements, strengthening cooperation among day care centers, kindergartens, and elementary schools, and expanding the after-school childcare system and preparing the environment for it to be used
c. Examining the review of the scholarship with its amount of monthly payment linked to an applicant's income after graduation toward a system allowing people to repay funds after they have “made it in society,” in accordance with people’s income after graduating from university
d. Support for housing expenses for families with small children
 
(3) Correcting the harmful effects resulting from deciding public finances on a single fiscal year basis

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