Japan’s economy is in peril and business should help save it with investment and wage rises, according to Sadayuki Sakakibara, the voice of corporate Japan.
Sakakibara, chairman of the powerful Keidanren business group, said Abenomics had worked well during the past three years but sluggish recent data meant the country was at a do-or-die moment, Yahoo reported.
“The virtuous cycle in the economy has slowed a little, and looking to next year the importance of wage rises to keep it moving is something we fully recognize,” said Sakakibara in an interview with the Financial Times.
“Of course, our stance will be a matter of vigorous debate between now and January, taking the whole economic situation into account. But we recognize the importance.”
Weak consumption and China’s economic slowdown are putting Japan’s economic progress over the past three years at risk. The Bank of Japan thinks wage rises are essential to drive up inflation and Prime Minister Shinzo Abe has pushed business to deliver.
Wages rose 2.52% at large companies this year, compared with 2.28% the year before. Sakakibara’s comments highlight the chances of another solid wage round in 2015.
Abe has recently shifted his attention to investment, urging companies to plough their record profits back into the economy. Sakakibara noted that Japanese companies were investing heavily overseas but acknowledged the need to spur spending at home.
“If you look at investment plans, large manufacturers are talking about an 18.7% rise in 2015—a big number. The issue is implementation,” he said.
TPP Beneficial
With the weak yen at 120 to the dollar and agreement on the Trans-Pacific Partnership trade deal, Sakakibara said he expected the investment climate to improve. “Consumption and business investment are vital factors to fuel a virtuous cycle in the economy. It’s important to keep them moving steadily.”
The Keidanren chief said there was still a long list of unfinished business from Abe’s “third arrow” of structural economic reforms that would help support investment.
“We’d like robust cuts in corporate taxes, we’d like robust deregulation, we’d like robust measures on energy. Labor regulation is still rigid; we’d like robust action there. Then there’s science and innovation policy where we’d like robust progress as well.”
“Overall, the Japanese business community is experiencing a short-term slowdown in China, but in the medium to long term, over the next one, three or five years, their confidence is still extremely high,” he said.
Sakakibara says he rates the breadth and depth of the TPP deal highly. “I’m convinced TPP will be a big plus for the Japanese economy,” he said. “This will be the pillar, the cornerstone of our growth strategy.”
The effect on agriculture is politically controversial in Japan, but Sakakibara said it was unavoidable. “Japanese agriculture had huge structural problems regardless of TPP,” he said. “The average age is said to be 67.”
“We regard TPP as a chance for structural reform in agriculture. To be specific, it’s a chance to consolidate small farms into larger-scale operations, or to bring business into the management of agriculture.”
