Kakutaro Kitashiro's FCCJ Talk about Manifestos and New Businesses

Takahiro MIYAO (Professor, GLOCOM, and Head, Japanese Institute of Global Communications)

Kakutaro Kitashiro, Chairman of Keizai Doyukai (Japan Association of Corporate Executives), gave a luncheon speech at the Foreign Correspondents' Club of Japan on Thursday, October 23, 2003. Mr. Kitashiro took up two of the issues currently focused by Keizai Doyukai: (1) elections based on manifestos, and (2) creation of new businesses. The following is a summary of Mr. Kitashiro's talk about those issues.

Manifestos for Elections

We have a committee called the political committee at Keizai Doyukai, which proposed last year that we should have manifestos for elections. Since then more and more people, including some governors of local prefectures, have been agreeing to this idea of elections by manifestos. We are pleased to see our proposal adopted in the current Lower House elections, because in past elections politicians often gave voters "oral promises," that were never kept.

Prime Minister Koizumi is now pursuing structural reforms, including privatization of postal services and reform of the Japan Highway Public Corporation. The problem is that Mr. Koizumi's policy is not fully supported by his own party members. Therefore, it is important to offer a manifesto to voters so that Mr. Koizumi can implement his reform proposal if he wins. The same thing can be said about the Democratic Party of Japan, which is also offering a manifesto promising structural reforms. It has been ten years since the single seat constituency system was introduced in Japan. However, this is the first time that manifestos are actually being adopted and policy issues seriously discussed in elections.

Creation of New Businesses

People say that the Japanese economy is recovering, and it is actually getting better according to the result of a recent survey among business managers. Unlike past economic recoveries in the 1990s we are experiencing an economic recovery without government stimulus policy. This time the recovery is due to the fact that business managers are trying to restructure their balance sheets and capital equipment as well as employment in order to improve their corporate profitability. As a result, stock prices have been increasing rapidly and business sentiment has improved significantly.

However, there are some concerns about sustainability of the current recovery. First, only foreign investors are net buyers of Japanese stocks, and domestic investors are still selling their stocks in the market. Second is the fact that profitable companies are mainly big manufacturers that are benefiting from exports or from business abroad. They are essentially dependent on the expansion of the U.S. market, and there is some concern about the U.S. economy as well as the stronger yen in the near future.

In order to sustain the current business recovery, therefore, we need to create more domestic business activities. Actually, technologically advanced manufacturing industries employing only 10 percent of the total work force in Japan are enjoying higher labor productivity than their U.S. counterparts, while other industries, mainly domestically oriented service industries employing the remaining 90 percent of workers, are suffering from much lower productivity.

While those advanced industries should continue advancing their technology and productivity, the remaining industries must create new businesses, especially new service businesses based on our daily life such as child care, health care, medical services, education, leisure and tourism. In order to expand these areas, we need more deregulation and we need to encourage new venture businesses in Japan.

Proposals to Encourage Venture Businesses

One of the reasons why there are not enough new venture businesses created in Japan is because those who try to start new businesses are not highly respected in society. Those who are in new venture businesses are highly regarded by more than 90 percent of people in the U.S., while they are respected by less than 10 percent of people in Japan, according to recent survey results. Such people in Japan actually may be considered strange and eccentric. So new value must be created to respect those who try to start new businesses in Japan.

Also, it is difficult to raise enough funds from investors for new venture businesses. Although there exists some "angel tax breaks," only twenty new businesses have been created in Japan for the last five years. So the tax system to encourage new businesses must be expanded and more widely applied.

Third, new venture businesses have a hard time selling their products and need support for marketing. Therefore, socially established managers should join outside boards of directors for venture businesses to help new businesses earn social trust and find new distribution channels.

Keizai Doyukai is proposing to adopt new values and favorable tax measures for new businesses in order to revitalize domestic industries and the Japanese economy as a whole.