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ECONOMY | CONFERENCE

June 2014
The Japan Summit
Symposium details key issues for a brighter future

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Japan’s economy, regional trade agreements, immigration, and the frequently precarious state of regional security dominated discussions at the Japan Summit 2014, although a majority of those taking part expressed a broad sense of optimism for the immediate future of a nation that has experienced a testing couple of decades.

Organized by The Economist and held at the Hotel Okura Tokyo on April 17, the day-long symposium opened with an address by Prime Minister Shinzo Abe that balanced his administration’s achievements to date with his ambitions for the months and years ahead.

Underlining his belief in a future that appears rosier than Japan’s recent past, Abe said the nation has “a golden opportunity to put the economy onto a stable, new growth track.”

“The economic policy my cabinet is pursuing must, this year, enrich each and every individual and deliver the fruits of growth to every corner of the nation,” he said.

Abe explained he intends to achieve this by making the most of Japan’s geographical advantage at the very heart of the booming Pacific rim region; second, by utilizing strong demand in developing Asian nations for Japan’s machine tools and capital goods; and, third, by opening the domestic economy to embrace “outside vitality, along with human resources, capital, and wisdom from abroad.”

Critical to this will be a series of trade agreements, the most important of which will be the Trans-Pacific Partnership, for which negotiations with the United States are ongoing.

“I confirmed with US President Barack Obama at The Hague in the Netherlands in March that we would focus our efforts going forward into concluding negotiations.

“We intend to overcome our mutual differences and together forge a sturdy economic order for Asia and the Pacific in the 21st century,” he said. “We wish to create an unshakable foundation for growth.”

Arguably the most unexpected part of his speech dealt with Abe’s intention to open Japan’s doors to “highly motivated and ambitious young people,” who want to pursue job or education opportunities, while he also expressed the need to move away from a male-oriented way of thinking in the workplace.

As well as requiring that 30 percent of all personnel hired by the national government are female, Abe is now calling on listed companies “to add at least one woman as a board member.”

Abe’s comments were critically examined by analysts and business leaders from a wide array of backgrounds, with the broad consensus that the government is on the right track—although much remains to be achieved.

“Everything that Mr. Abe said shows that he wants Japan to be a player and to be at the center of the highest growth area of the Asia–Pacific region,” said Jesper Koll, managing director and head of Japanese equity research for JPMorgan Securities Japan Co., Ltd.

“Japan does not want to be on the periphery, and that’s a good thing,” Koll said, adding that he believes there has already been steady progress in addressing the economy and that there is “a sense of urgency” in the government’s actions.

Turning to the impact of the three arrows of the prime minister’s much-vaunted Abenomics reforms, Takatoshi Ito, a professor at the National Graduate Institute for Policy Studies, said the first arrow (monetary easing) had been “a great success that has really changed the economic scene.”

Stock prices are up and the over-appreciation of the yen has been corrected, he pointed out.

The second arrow (fiscal stimulus measures) had also been a success, he said, adding that the rise in the consumption tax in April had been a needed measure.

“But the third arrow is somewhat disappointing,” Ito said, referring to Abe’s vow to bring about the structural reforms required to shake up and reinvigorate the national economy.

“I thought the changes would have come much earlier,” he said. “We desperately need action, not more talking.”

Koll was more upbeat on the government’s third arrow achievements to date, pointing out that it had taken the bold step of breaking up the monopoly that previously permitted nine utilities to exert complete control over the power-generating sector.

“This deregulation is creating new investment opportunities for entrepreneurs to invest in Japan for profit,” he said. “I’m really happy because Japan is one of the few countries that is talking about changing the structure of its economy. In Europe, in comparison, there is no debate on one of the most ineffectual agricultural policies that exists.”

Commenting on the prime minister’s speech, Gerald Curtis, a professor of political science at Columbia University, agreed that “some things have been accomplished,” but cautioned that Abe still has a lot of items on his agenda.

“The next three to six months are going to be a critical time for this administration and it is time to deliver,” he said. “If Abe cannot deliver, there will be skepticism about his lack of specificity.”

The three key issues as the administration moves ahead will be corporate tax reforms; opening Japan up to foreign guest workers; and taking on vested interests, particularly in the health sector, Curtis said.

“If Abe is able to make three big announcements on these items, then the third arrow will look like it is happening,” he said. “But if it is not happening by September, then the market reaction will be that these are pretty words, but they don’t have much substance.

“These next six months are absolutely critical for Mr. Abe.”

A panel discussion later in the day addressed the issue of Japanese companies wasting the talent they have in their workplaces, as well as the changes—in education and attitudes—that will have to take place for the nation to remain competitive.

“I think the talent here in Japan is very inward-looking and it is very hard for a company like ours to find creativity and flexibility in the workforce,” said Roderick Lappin, vice president of the Lenovo Group Ltd. and president of Lenovo NEC Holdings, its joint venture in Japan.

“From the education system through to an employment system that pulls people in, hiring here is quite a challenge for us,” Lappin said.

Yukiatsu Akizawa, chairman and CEO of Heroes’ Edutainment Co., Ltd. and the founder of the ampm Japan chain of convenience stores, suggested that the rapid economic growth of the last three decades had created a generation of people who are “complacent about their situation” and children who have no dreams about their futures.

The foundation aims to forge a new generation of children who, once they embark on a project, have the “spiritual strength” to not give up, as well as that all-important dream to chase.

Lappin said there is a wider need to encourage young Japanese people to go abroad to study and experience different corporate cultures before bringing that know-how back to this country.

“Fewer Japanese are interested in going overseas than ever before,” he pointed out. “We have some great companies in Japan that are becoming globally competitive—firms such as Fast Retailing Co., Ltd. and Rakuten, Inc.—that have flexibility, creativity, and a passion that is lacking here but which we need to drive back into society.”