Sept. 18, 2014 6:55 p.m. ET
My administration has now begun its second chapter, with a newly appointed cabinet. My highest priority as Japan’s prime minister remains the economy. Spurring strong economic growth and ending deflation and its damaging effects remain my administration’s key aims, and my new cabinet choices were made with these goals in mind.
We have already seen improvements in the employment rate and wages. Make no mistake, Japan will emerge from economic contraction and advance into new fields and engage in fresh challenges.
Some have said that Japan’s structural reforms—what I call the “third arrow” of Abenomics, alongside the first two “arrows” of monetary and fiscal policy—are at a standstill and that wage increases aren’t keeping up with price increases. But there is no reason for alarm. We remain on the path toward a revitalized Japan we began in December 2012.
To help companies—the engine driving economic growth—increase their profits, we reduced Japan’s effective corporate tax rate by 2.4 percentage points this fiscal year, and will cut the rate further next year. We aim to reduce the effective tax rate to the 20s over several years. We are also strengthening corporate governance. For example, among companies listed in the first section of the Tokyo Stock Exchange, 74% have appointed outside directors, a 12% increase over the past year.
In industrial fields that have had few new entrants over the past few decades in Japan—namely the electricity business and health and medical services—bills to encourage new entrants will be passed in the Diet, our parliament, while laws already enacted are now being implemented. The arrival of new participants in the electricity market is particularly encouraging. In just over a year the market has grown 1.6 times—from 38 companies to 59.
Relaxation of visa requirements contributed to the number of foreigners visiting Japan last year, surpassing 10 million for the first time. And so far this year we’ve already seen a 25% increase over 2013’s impressive gains.
Bills were also passed in the last two Diet sessions to turn agriculture into a growth sector. One key change has been the establishment of regional “farmland banks” to promote farmland consolidation and large-scale farming. We also intend to reform our traditional agricultural associations to strengthen the competitiveness of Japan’s farmers.
Deregulation is also proceeding. Within our National Strategic Special Zones, we are expanding the geographical areas in which regulatory reforms will be implemented. Since mid-July, there have been more than 200 proposals for regulatory reform, and several deregulation bills will go before the Diet in the next six months. These special zones will support new businesses, including non-Japanese startups, to create a welcoming environment for talented entrepreneurs, their employees, and home-support workers from overseas.
My administration’s growth strategy is paying off. The unemployment rate is now below 4% and the labor market is tightening. Big corporations and nearly two-thirds of small- and medium-size enterprises have raised wages. With the growth in the number of employed persons, total payroll has been trending up since April 2013. In July total payroll increased by more than 3% year on year. During the second quarter of 2014, even though it was a period of negative growth, the number of irregular employees without the security of salaried positions declined while the number of regular salaried employees rose. Over the past three years, roughly one million workers have moved from irregular employment to regular employment. Capital investment by companies has increased on a year-on-year basis for five consecutive quarters.
Meanwhile, revenues from the increase in the consumption tax rate, which in April rose to 8% from 5%, are allocated exclusively to social security. This eliminates concerns about the future and leads to expanded future consumption.
As for structural issues, specifically with regard to Japan’s dwindling birthrate and aging population, we are doing the following:
• Creating environments in which it is easier for women to play active roles in the public and private sectors. I have put my own pledges into action, increasing the number of female ministers in my cabinet from two to five. Japan’s corporate leaders should follow my lead.
• Creating more child-care facilities in urban areas and more high-wage jobs in rural areas. I am proud to say that in the year and a half since the start of the Abe administration, the number of women in the Japanese workforce has increased by 820,000. The female labor force participation rate between 25- and 44-years-old has increased by around 4% since the beginning of my administration—to a record-high 74.2% at the end of July.
• Reviewing the use of pension assets to fortify the people’s confidence. The total investment income of the Government Pension Investment Fund (GPIF) within the past two years amounted to around 25.2 trillion yen. Reform of the GPIF is currently under way. My new minister of health, labor and welfare, who has been a leading advocate of pension reform within the Liberal Democratic Party that I lead, is the right person to advance these reforms.
The Trans-Pacific Partnership (TPP) Agreement is also an important pillar of our growth strategy. Japan will benefit from increased trade and economic growth in the region. With regard to TPP negotiations, I have appointed as minister of agriculture, forestry and fisheries the person who has been responsible for TPP within the Liberal Democratic Party. Our aim is to conclude the TPP talks as soon as possible and usher in a new era of trade.
My cabinet and I will do all we can to implement our growth strategy and economic reforms and press forward with the second stage of Abenomics.