31 July 2002
| The Democratic Party of Japan's designed its own broad measures for industrial revitalization - we have reviewed the country's mid / long-term economic strategies based on the assumption that improved productivity and competitiveness of Japanese companies are vital precondition for Japan's economic recovery. |
| In March 2002, the "Study Group on "Industrial Revitalization" was formed as a private study group under the leadership of DPJ Policy Research Committee Chair Katsuya Okada. With Akira Nagatsuma, a Lower House member assuming the Secretary-General of the group, team members, along with researchers from a private think tank, met for 20 plus times during a period of about four months. The meetings resulted in a draft proposal based on expert opinions and discussion of relevant issues. Then the draft proposal was submitted twice to the DPJ's Next Cabinet (shadow cabinet) and approved on the 30th of July. |
| 3. Members of Study Group |
| Chair: Katsuya Okada, Secretary-General: Akira Nagatsuma, Kenji Kitahashi, Shigeyuki Goto, Koji Matsui, Kohei Otsuka, Takeaki Matsumoto, Hideki Wakabayashi, Atsushi Oshima, Masamitsu Jojima and researchers from a private think tank (in random order, official titles omitted) |
| I. Basic concepts on industrial revitalization |
| II. Measures to break "Japan, the no-way-out" mentality |
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1) Maximizing the use of human resources
2) Supporting ventures
3) Energizing businesses
4) Promoting more competition in the Japanese market
5) Coping with the competition in the global economy |
| III. A vision of Japanese economy for the next ten years |
| I. Basic ideas about industrial revitalization |
| 1. Why "industrial revitalization" at this juncture? |
We believe that our nation needs a speedy implementation of new measures to revitalize its industries for the following three reasons:
First, the effectiveness of economic measures depending on an increase in public investment is severely limited due to various pressures coming from structural adjustments, such as asset deflation. For a full-scale economic recovery, an improvement in micro-economic environments and increased business activities are vital.
Second, if the current trend of ageing of our society persists, the burden on the younger generation will inevitably increase. Therefore, it is vital for Japan to boost its productivity growth as quickly as possible in order to maintain certain level of standard of living, and thereby fending off the eventual increase in the social security cost.
Third, one of the Government?不 major responsibilities is to create an environment in which everyone can secure a job in accordance with his or her willingness and ability. However, the actual state is far from this ideal. In proportion to the rising rate of unemployment, the number of workers who decide to keep their current job against their will is also on the rise.
The days left for us are numbered. If the current situation in our economy prolongs, the effects of the proposed policies will be muted, as companies, especially small- and middle-sized businesses, will be irrecoverably weakened. Furthermore, continuous deterioration of the quality of workers, as well as, the destruction of vital institutional infrastructure, such as the financial system or pensions, would certainly undermine Japan?不 economic and industrial bases. Consequently, the chances for the Japanese economy to recover will be even slimmer. Hence, radical economic structural reforms need to be implemented as soon as possible. |
| 2. Policy for industrial revitalization |
In order to maintain steady economic growth, industrial productivity must be improved. One of the structural problems facing the Japanese economy is the two-tiered industrial structure. Generating productivity growth in sectors that already have a high level of productivity is equally important as improving productivity in the weak sectors; we must work to realize the two in tandem.
For the competitive industry, or the export-oriented industries, we will stick to the policy of supporting the manufacturing sector. Japan's industrial advantage still lies in its high level of skills in the manufacturing sector and to play down its importance may cost us our comparative advantage.
In order to maintain our advantage in this sector, it is important to improve the level of research and development, as well as to sufficiently protect the intellectual property rights.
Moreover, since the advantage in Japan's manufacturing industry is attributed to its manufacturing techniques, especially in the processing technology, we will make sure that the overriding priority will be placed in the field of nanotechnology which has the potential to improve the processing technology.
As to the less competitive, domestic market-oriented industries, we will improve their productivity level through large-scale deregulation. This category includes service industries that provide day care, such as medical & welfare services. The revitalization of such industries would lead to higher quality of life through its new & improved services.
For those industries that would be largely affected by deregulation, we will work hard to gain their support for deregulation measures, by presenting our vision for each industry incorporating actual measures for strengthening such industries and providing the necessary safety nets.
Nevertheless, we must ensure that what we protect in our industry policy is strictly the "roles and functions" of industries contributing to enrich people's lives, and we should neither rescue specific companies that have lost their competitiveness nor help such companies to hold on to their employees. |
| II. Measures to break "Japan, the no-way-out" mentality |
In order to revitalize our industries, it is important for us to think of the undergoing drastic changes in the business environment as an "opportunity" instead of "threatening risks". However, the aspirations and the frontier spirit among the Japanese people have diminished significantly in an inverse relation to the improved standard of living since the end of World War II. On the contrary, the whole nation is increasingly leaning toward attitude of avoiding risks. Under such circumstances, we Japanese are caught in a vicious cycle in which the economy continues to decline quietly while a stifling sense of a "no-way-out situation" becomes more keenly felt.
In order to keep ourselves away from such situation, first, we will list measures to maximize the use of human capital and to stimulate the "can-do" spirit in people and provide them with the opportunities to improve their abilities. We will also present a list of measures to support venture businesses for generating leading industries, to help companies improve management skills and competitiveness, or to encourage more competition to boost productivity growth and generate an increase in international competitiveness to cope with globalization. |
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1) Maximizing the use of human resources |
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i. Providing people with incentives |
| (1) |
Additional incentives, including tax reforms
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1. Allowing companies to introduce more performance-based salaries and flexible stock options
2. Allowing companies to set up a US style limited liability corporation |
| (2) |
Creating mechanisms for supporting repeated entrepreneurial efforts
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1. Expanding the range of assets that cannot be seized by creditors at the time of bankruptcy
2. Introducing safety nets for small business owners who pledged their own assets as collateral. |
| (3) |
Creating an environment in which entrepreneurs receive a proper social evaluation
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1. Setting up a system for awarding entrepreneurs
2. Emphasizing independence and a challenger's spirit in the area of education |
| (4) |
Giving incentives to university researchers
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1. Turning State-run universities into independent administrative corporations whose employees do not have civil servants status.
2. Reinforcing competitiveness of Japanese universities by imposing a ceiling on intra-university promotion
3. Expanding the TLO (Technology Licensing Organization) system and reinforcing a system to support efforts to obtain patents
4. Creating Japan's Nobel Prize to award Japan's competitive researchers under 40 years old. |
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ii. Designing a system in which human resources are utilized to the maximum in the national economy as a whole |
| (1) |
Encouraging women to join the workforce -Supporting them by means of taxation, child-care facilities and promoting their entrepreneur spirit. |
| (2) |
Infusing "new blood" into companies ?植dopting a new corporate tax based on companies' gross profits as well as realizing major corporate tax cut |
| (3) |
Introducing a system to provide a "one-stop service" for re-employment by working out a collaboration between the public and private sectors |
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iii. Creating more opportunities for improving vocational skills in accordance with abilities and aspirations |
| (1) |
Supporting the establishment of institutions that provide entrepreneurial and management education |
| (2) |
Infusing "new blood" into companies ?植dopting a new corporate tax based on companies' gross profits as well as realizing major corporate tax cut |
| (3) |
Introducing a system to provide a "one-stop service" for re-employment by working out a collaboration between the public and private sectors |
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2) Measures to support ventures |
| (1) |
Expanding the scope of the current SBIR (Small Business Innovation Research) program and introducing a Japanese version STTR (Small Business Technology Transfer) program |
| (2) |
Broadening the range of tax break for angel investors |
| (3) |
Supporting the set up and running of a nationwide network of angel investors |
| (4) |
Fostering the "spin-out" program for engineers |
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3) Measures to energize businesses |
| (1) |
Reinforcing corporate governance |
| (2) |
Strengthening support for technological innovation |
| (3) |
Enhancing the capacity for research and development through the promotion of corporate realignment |
| (4) |
Utilizing joint government-private sector R&D projects for reducing redundant investments among companies |
| (5) |
Introducing new accounting rules that admit accelerated amortization for high-tech companies |
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4) Measures to promote competitiveness |
| (1) |
Facilitating deregulation and presenting a vision for strengthening industries |
| (2) |
Promoting competition in the area of public utilities in order to rectify the high-cost structure |
| (3) |
Promoting further privatization of government managed businesses and securing a universal service at the same time |
| (4) |
Strengthening the role of the Japan Fair Trade Commission to ensure fair competition |
| (5) |
Promoting more penetration of foreign capitals into the Japanese market |
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5) Measures to cope with the global economy |
| (1) |
Promoting the Free Trade Agreement among Pacific Rim countries |
| (2) |
Reinforcing the protection of intellectual property rights overseas |
| III. A vision of Japan's economy for the next ten years |
Based on the assumption that the policies proposed above are all put to work, this is our vision of the Japanese economy for the next decade.
The current sense of crisis regarding the future of the Japanese economy will give way to an national energy that pushes forward the above-mentioned reforms. In that, more Japanese people will begin considering the changes in the environment as an opportunity rather than a crisis.
As a result, we will begin to see signs of accelerated activity in the business sector in general, including an increase in the number of start-ups and ventures and a growing willingness among existing businesses to invest in the R&D. Among the companies in the low-productivity sector, improvement of productivity will become tangible following a fierce competition among rival companies who were prompted into the market by measures of large-scale deregulation, as well as by the adoption of new technologies or new management techniques.
Meanwhile, venture business activities will lead to an enhanced capability for creating new products and services, which will, in turn, reinforce the capacity to create demand. Capital investment for research and development, among other things, will also increase.
The energized business activities will boost supply capacity on the one hand and spur demand on the other, thus the Japanese economy will enter the phase of stable growth.
When measuring the performance of the economy stimulated by industrial revitalization with the growth rate of labor productivity in the market as a whole, we expect the results to be clearly shown in the figure in ten years, because the impact of the above-mentioned reforms, if implemented in tandem, are intended to be tangible in the short term. |
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