Envisioning
A Vibrant, Attractive Nationin the Twenty-First Century

Nippon Keidanren
Japan Business Federation

ENVISIONING A VIBRANT, ATTRACTIVE NATION IN THE TWENTY-FIRST CENTURY2025

A NIPPON KEIDANREN VISION OF THE FUTURE OF THE NATION,
WITH POLICY RECOMMENDATIONS TO ACHIEVE THE GOAL OF
MAKING JAPAN A VIBRANT, DYNAMIC PLACE ATTRACTIVE TOPEOPLE THROUGHOUT THE WORLD.

Nippon Keidanren
Japan Business Federation

ENVISIONING A VIBRANT, ATTRACTIVE NATION IN THE TWENTY-FIRST CENTURY

2025

Economic Policy
Reforms of the social security and tax systems will spark sustained growth led by the private sector.
“Made by Japan”

Focus on the Environment

Improved Living Conditions

Japan will apply principles ofcorporate management to its
economy, making use of native
innovation and technology andtapping the resources of othercountries to build value for itself
and the world.

Japan will remold its economy
around the concepts of reusingmaterials and preserving the global
environment, fostering industrial
competitiveness in the process.

Japan will create comfortable,
high-quality life spaces for
its people, providing functional
urban environments andrevitalized communities to truly
satisfy residents.

Social Structures
A new focus on the primacy of the individual will create a nation that relies on the power of its people.
Corporate GovernanceRegional Autonomy

Lifestyle Choices

Acceptance of Diversity

Japan will improve the corporate
governance of its companies,
creating an economic environment
where individuals can fully extend
and benefit from their talents.

Japan will form a system of largely
autonomous states and transfer
greater power to local governments,
giving communities a chance to tap
their potential and fostering broad
networks of individuals.

Japan will create an environment
offering residents the opportunity toachieve fulfillment and affluence as
they undertake a range of challenges
and exercise diverse choices.

Japan will build a society where
people from around the world canlive in comfort and participate inmeaningful ways, with full rewards
for their talent and effort.

International Ties
Tighter integration between Japan and its East Asian neighbors will spark a wave of regional development.
Opening the Nation

The East Asian Economy

Freedom and Cooperation

Japan will open itself to the world forthe third time in its modern history,
providing broad access to its markets
and sparking competition andeconomic growth.

Japan will lead the way in creating afree trade sphere in East Asia, aregion of tremendous vitality anddiversity that will become a major
hub of global economic activity.

Japan will strengthen East Asian
integration by ensuring the freemovement of goods, people,
services, capital, and information,and by boosting economic
development and solving global
problems.

2

AT THE CLOSE OF THE TWENTIETH CENTURY JAPAN SUFFERED THROUGH ITS “LOST DECADE,”
seeing its economic strength falter and its confidence wane both domestically and on the international stage. In the twenty-first century the nation must find a way to turn this situation around.
Nippon Keidanren, the Japan Business Federation, has crafted a vision for the Japan of 2025—a nation that has regained its vigor and become an attractive place to people from around the world.
The Keidanren vision for Japan in  projects acountry where diverse values come together to foster
dynamism and creativity. This environment will havedeep roots on the level of individuals, being built on
the trust between people and their empathy for one
another. It will provide chances for those individuals
to enjoy true affluence, both economically and in termsof their personal achievement. And it will make Japana place where individuals from around the world wantto spend their leisure time, invest their assets, build
their careers, and live their lives.
So how to bring about this new Japan? There arethree key areas where we must concentrate our efforts if
this vision is to become reality. First of all the economy,
which has been treading water for so long, must be
reinvigorated to provide the energy to drive the remolding of the nation. Keidanren proposes to bringthis about by pursuing a “made by Japan” policy, withJapanese business interests positioned in a broader
global context, providing Japan’s knowledge and technology to drive economic development around theworld, not just on Japanese soil. We also urge Japan tostructure its economic activities in ways that give
greater importance to the environment, growing its
economic presence through the betterment of the natural world on which we depend for survival. And we callfor Japan to create new urban and residential environments where all people can lead satisfying existences.
The society infused with this contentment will be
one where individuals can make full use of their talents
and knowledge, creating economic value and achieving personal growth. Individuals’ efforts will be supported by new structures of corporate governance thatallow them to do their personal best and be rewarded
for it, as well as a shift from the primacy of corporations to the primacy of people in society; by new administrative structures, such as a system of largely
autonomous states, that remove power from the centerand place it in the hands of people in communities
throughout Japan; and by societal attitudes that welcome all contributions from all people, including nonJapanese who come to live in this country.
This international outlook will also be a key elementof the Japan that Nippon Keidanren envisions in .
We call on Japan to lead the way to forming a free economic sphere in East Asia, a region of tremendous diversity and immense potential. The nations of East
Asia are natural partners for Japan, and we believe thatJapan’s economic status makes it a natural leader for
growing economies and developing ties in this part of
the world. Opening Japan to these possibilities will bea key step in its revitalization.
In these ways Keidanren believes that Japan can become a vital, attractive nation by —a beacon topeople around the world and a model for developmentof all nations in the new century. Toward this end weurge that the Japanese people become a prime engine ofchange and leadership, with individuals building ties
throughout Japan’s society to strengthen it and move it
forward. We also urge change in the political sphere,
where the voice of the people must make its strength
felt through an energized political party system.
Nippon Keidanren will play a leadership role to help
realize this vision. The following is a brief introduction
to the ways in which we intend to do so—a blueprint
for the creation of a new Japan by .

3: the economy

JAPAN WILL OF COURSE RELY ON ECONOMIC GROWTH to power the development of new social structures at home and new relations with nations around the world. Nippon Keidanren envisions
a Japan that enjoys 2% annual growth in real terms through 2025 by laying the foundation required
for this. The components of this foundation will include a self-regulating economic system driven by
the private sector and market concerns; toward the creation of this system, Japan must reform its tax
and social security systems and carry out drastic restructuring in the financial sphere.
Japanese society is now undergoing drastic changes, with a falling birthrate and climbing life
expectancies combining to create a population pyramid that grows more top-heavy every year. In theface of these demographic shifts the government must create a tax system that encourages fresh economic activity by spreading the tax burden throughout society.This will be accomplished by reducing
the tax load on corporations and gradually raising the consumption tax—levied on all goods andservices sold in the country—from its current rate of 5% to 16%, a level that will keep public services
running while allowing companies to redirect their capital into the creation of new wealth and opportunities for the Japanese. At the same time social security must see a narrowing of priorities so thatpeople can continue to receive the benefits they truly need without overtaxing the system as a whole.
As Japan brings stability to its economy through these reforms, it will also formulate a new approach to its economic activities in the global context, pursuing a “made by Japan”strategy and staking
out an economic presence focused on environmental concerns. Last, the fruits of the nation’s economic
activities will be channeled into creating comfortable, affluent living conditions for people in Japan.

4Through 2025 Japan will

enjoy 2% annual
growth in real termsby laying the required foundation.

“Made by Japan”
The phrase “made in Japan” has in the past served as a symbol of
the quality engineering performed by Japanese in their own nation.
But Nippon Keidanren sees the key phrase for the country’s economic activities in the twenty-first century as “made by Japan”—
symbolizing Japanese involvement in the creation of value on a
global basis. The nation will continue to innovate at home, but it
will make full use of technological resources from around theworld, adding value in this process, both for itself and for the
global economy.
One pillar of this strategy is increased cooperation between industry and academia. This will include reform of Japan’s schools

and broader acceptance of foreign specialists and engineers in its
academic institutions and companies. A second pillar is a new approach to capital distribution, with the government boosting its investment in research and development and opening the selection
process for the industrial-academic projects it finances. And athird pillar is heightened competition, with the government bringing about competitive development of new technologies, lowering
the corporate tax rate, and encouraging new investment fromJapanese and foreign firms. Through these steps, the “made by
Japan” strategy will revitalize the domestic economy and position
the nation as a key contributor to global economic growth.

Economic Environmentalism
Nippon Keidanren sees the Japan of  as a nation whose economic activities are thoroughly informed by environmental awareness. As humanity comes to realize its need for a healthy global
environment, corporations that direct their business in ecologicallyfriendly ways will carve out important economic roles. The government will need to craft policies to create a recycling society; this will
form the foundation for Japanese firms to participate strongly in the
global market, where their products, technologies, and businessmodels will be seen as offering a way to preserve the environment.
This approach will require the nurturing of individuals who fully
understand and welcome the environmentally aware activities ofenterprises, and a market environment that rewards those activities. Backed by this society, businesses will need to develop worldleading technologies in areas like waste reduction and new, clean
energy systems. In this way they will remain vital to Japan and theglobal economy in the twenty-first century.

A Residential RenaissanceThis environmentally aware thinking will also be reflected in thecreation of new residential environments in Japan. We see the revitalization of urban spaces and the creation of a new tax system that
supports home ownership as important measures to achieve domestic demand-led growth, creating a vibrant Japan by .
Durable homes that retain their value and a tax system that does
not punish ownership will create fresh demand in the housing industry. Companies will thrive and contribute to the creation of sat-

isfying living environments as they seek to meet demand in thismarket, for instance by creating homes friendly to the needs of theburgeoning elderly population in Japan. Local governments will
also need to come up with measures to make their areas attractive
places to live; environmentally friendly cities will be one target toshoot for as the public sector induces private investment in urban
renewal projects.

5: society

NIPPON KEIDANREN’S VISION FOR JAPAN IN 2025 includes a concept for a revitalized societythat draws on the talents of all its members and provides a rewarding, liberating environment inwhich to extend those talents to their fullest. All sectors of society have important parts to play in its
restructuring—enterprises will need to apply new concepts of corporate governance that place
power more directly in the hands of workers, government will need to implement policies that givebusinesses and individuals more room to innovate and develop themselves, and individuals themselves will need to come up with new approaches and ways of thinking to deal with the problems ofthe twenty-first century.
Japanese society in the postwar era has been shaped by companies and the role they play inpeople’s lives. As Japan moves forward, though, it will have to shift society’s center of gravity from theinterests of corporations to the lives of individuals.The Japanese will identify themselves less with thecompanies for which they work and more with their own personal talents and interests. They will
enjoy new freedom to pursue these interests as employers implement policies aimed at giving themfuller rein; and they will find their activities increasingly unfettered by the hand of centralized government. In short, the Japan of 2025 will be powered by individuals and the communities they form. And
these communities need not be bound by national borders—foreigners in Japan and Japanese active
overseas will be a key element of this diverse, vigorous society.

6As Japan moves forward it will

have to shiftsociety’s center of gravity
from corporations to human beings.

New Forms of GovernanceNippon Keidanren calls on Japanese companies to revamp theirpolicies of governance to help realize this new society.
Communities of self-reliant individuals with clearly-defined values
will form the core of the Japan of , and people must wean
themselves away from the business-centered culture that compels
uniformity if they are to play a role in these communities. Toward
this end, enterprises will create new structures of corporate governance that give people the space to do their personal best andproper rewards for achieving it.

Trust is the most important element to consider when formulating this new governance. Self-reliant people will be aware of themarkets through which society operates—labor, capital, goods,
and services—and these markets will need to be open to all if they
are to inspire trust among the individuals living in communities
affected by them. Corporations and their managers may no longer
impose conformity through their leadership of society, but they
will continue to play a leading role in the creation of the trust
underpinning it.

Enhancing Autonomy
Shifts in power will also be seen in the administrative sphere.
Japanese government in the past has been a defining force for the
lives of the people; this will change as individuals become more
empowered and assertive, seeking to forge their own communities
and take part in public affairs that were once the domain of thestate. Individuals will power the healthy, vibrant society of ,and administrative structures that remove power from the centerand disperse it to place it in the hands of those people will be key.
Japan’s present system of weak prefectures under a strong central government must be replaced with a system of large states—asmaller number of autonomous bodies with more say over theirown affairs than the current divisions. These states will administrate local affairs more efficiently and effectively than the monolithic central government has in the past, and residents of local
communities will feel the benefits of this change as their needs andwants are met readily by local government bodies with a finger
firmly on the diverse pulses of people in different areas.
Individuals within these regions will be able to further strengthen
their communities by joining with other public-minded people toform cooperative markets and other networks.

Personal Affluence
People are content when they are reaching their full potential; they
can reach this potential only when a wide array of choices lies before them. Japan’s society in  will be one that provides choice
to its members. Individuals must work to create this new society:All people will need to join forces and create the institutions andsystems giving them the freedom to challenge themselves and tomeet the challenges that their diverse choices bring them.

Nippon Keidanren envisions people creating institutions andsystems in education, where a variety of learning opportunities
will suit their abilities and aspirations; in labor, where a wide range
of jobs will provide them paths to success; in lifestyle, which willoffer choices that do not disturb family life or child rearing; and in
medical services and postretirement living.

Vibrant Diversity
It is not only Japanese citizens who will help to bring these choices
to our society. Non-Japanese who come to live in this country willbring diverse viewpoints and talents. Japan must create an environment where foreigners can actively participate in economic

and social activities. On an individual level this will require greater
tolerance toward diversity; on the administrative level, the government must open Japan’s doors to people from around the globe sothat they can display their ability in this country.

7: an international japan

AS JAPAN WORKS TO REVITALIZE ITSELF BY 2025, it will need to turn its gaze outward as wellas inward. As shown by the “made by Japan” strategy outlined above, the nation will no longer focus
solely on creating economic value within its borders; it will rather look for ways to participate in economic activities around the world, contributing Japanese technologies and talent to global development.This borderless approach to business will push Japan to open itself to the world and strengthen
its ties with other nations, particularly its neighbors in East Asia.
Japan has in the past proved itself capable of opening its borders to the outside world, and it willneed to do this again in the coming decades. This will be coupled with a new leadership role for thecountry in the regional economy—while Japan’s presence has always been large thanks to the scale ofits economy, in the twenty-first century it will also need to be an active presence, with the nation leading others in the region into a more integrated economic future. In this way Japan can ensure its own
economic health as it helps to develop and benefits from the dynamism and diversity of East Asia.

8Japan will look for ways toparticipate in economic
activities around the world,
contributing Japanese technology and talent.

Opening the Nation
After a long period of seclusion Japan opened its doors to the outside world in the Meiji era. This flowering in the late nineteenth
century gave the nation a springboard from which it vaulted into
the ranks of the world’s powers. Again, following World War II,
Japan shed its old systems and made its way into the international
community, reaping the benefits of economic development in theprocess. By  Japan will have performed this task again, opening itself to the world for a third time. This opening will come inregulatory areas: Japan will increase access to its markets, providing its own corporations with heightened competition and promoting economic growth at home and throughout Asia, whereother nations’ firms will leap at the chance to improve their products and services and market them in Japan. Lower regulatory
walls will be a catalyst for growth and a force raising economic
performance throughout the region.

The East Asian Economy
As the region enjoys this growth, it will increasingly see the wisdom in unifying its economies and building a framework for regionwide economic activities. Europe and the Americas are on
course to become increasingly competitive and dynamic economic
spheres thanks to their efforts at integration and the creation offree markets. East Asian nations must not leave themselves vulnerable to such powerful global competition. Nippon Keidanren envisions Japan in a leadership role in efforts toward creating a zoneof free economic activity in East Asia, a region of tremendous vi-

tality and diversity that is destined to become a major global hub.
Asian nations today are moving to conclude individual trade
agreements with other nations around the world. These disparate
approaches taken by the nations will not position East Asia as a
hub of global growth, however. A unified approach is called for;and by , Japan will have staked out a strong leadership role inthe development of a regional economy encompassing more than billion people and $ trillion in total GDP.

Freedom and Cooperation
Nippon Keidanren believes that Japan must work to ensure regional freedom and cooperation if it is to wear this mantle of leadership. Our vision for  includes a focus on five freedoms—in
the movement of goods, people, services, capital, and information
throughout East Asia—and on two vital forms of multilateral cooperation, aimed first at boosting regional economic development
and second at tackling global problems impacting the region andthreatening its progress.
Japan must not view the rising economies of East Asia as com-

petitors or threats. The nation stands to benefit from the vitalityand diversity of the region if it opens its borders and actively seeks
to accumulate intellectual resources. The growing wealth of East
Asia should be seen not as a rival to Japanese capital but as a complementary force, and Japan should clarify its open attitude toward
this force through policies that open the nation to investment, imports, and immigration. A Japan at the forefront of an Asian freeeconomic sphere will be an integral part of the global community.

9THE ACHIEVEMENT OF NIPPON KEIDANREN’S VISION of a revitalized Japan in 2025 will require action fromtoward a vibrant, attractive
present

Economic Policy
The reforms and policies
needed to seed new,sustainable growth led by
the private sector• Introduction of a system of
taxpayer identification
numbers, enabling collective
payment of taxes and social
security contributions• Reform of income taxation to
spread the burden more
equitably and make it lighter• Lowering of second-tier public
pension benefits by 5% in
fiscal 2004

Social Structures
The changes required torealize a society whereindividuals make full use of
their talents and energies

International Ties
The steps needed to form an
integrated East Asian
economy and strengthen
global competitiveness10• Launch of annual 1% hikes in
the consumption tax startingin fiscal 2004, bringing the ratefrom 5% to 16% by 2014

• Rethinking of thegovernment’s approachto research anddevelopment spending• Development andimplementation of
resource-reuse and newenergy technologies• Strengthening ofcooperative ties between
industry and academia• Major reductions incorporate tax rates• Construction of high-quality
new housing and promotionof residential relocation• Deregulations aimed at
sparking development of
new technologies• Promotion of ecologicallysound corporate management• Construction of recyclingbased social systems• Improvement of corporate
governance in Japan• Promotion of mergers of local
administrative units• Introduction of diverse
working styles• Establishment of strong
corporate identities forJapanese firms• Stimulation of latent demandthrough cooperative regional
market activities• Creation of an environment
allowing people to both workand rear children• Improvement of
capital markets• Provision of wide-ranging
educational services based oncompetitive market principles• Promotion of global
economic liberalizations• Establishment of leaders’and ministers’ meetings
among 13 East Asian nations(ASEAN and China, Japan,
and South Korea); to be held
twice annually through 2015

• Formulation of a shared vision
for constructing an East Asian
free economic sphere• Fundamental reform of
the tax system to boost new
home ownership• Legal reform to allow
married couples to keep
separate surnames• Conclusion of bilateral andregional agreements oncross-recognition for
qualifications in specialist
and technical fields

government, business, and individuals.This overview of the years until 2025 shows the general timeframe for that action.

nation2010

2015• Reduction of public pension
benefits by 11% in fiscal 2011

• Establishment of Japanas a global center for creating
added value• Formation of aninternational system forrecycling resources• Creation of global rules
making Japanese firms’
knowledge and technologies
more marketable aroundthe world• Expansion of businessmodels based on conceptsof recycling

2020• Potential reduction of theconsumption tax rate to 10%(assuming that averageannual growth is 3.8%
nominal, 2.6% real, and thatpolicies are implemented toaugment Japan’s shrinking
labor force)• Reduction of the overall
tax burden of the people tobelow 50%
• Achievement of averageannual nominal growth of
3.0% and real growth of 2%
over the first quarter ofthe century• Implementation of newenergy supply systems

2025• Drastic improvementof residential andurban environments
throughout Japan• Achievement of an
economically healthy
Japan with strong
environmental awarenessand deep ties to the restof the world economy• Construction of urban
environments rooted inshared values• Establishment of a systemallowing individuals to opt
for voluntary euthanasia• Finalization of a system forbringing foreigners to workand live in Japan• Advancement of the five
freedoms—in goods, people,
services, capital, andinformation—and two formsof cooperation, to solve
economic problems andboost regional growth• Formation of broad-based
networks in the areas of
medical and elderly
care through linkages
between institutions offeringvarious services• Actualization of the freeeconomic sphere in East Asia,with most nations taking part

• Remaining nations to join
the free economic sphereby 2020• Shift from a prefectural
system under a strong
national government to asystem of independent states• Achievement of a diverse
nation where individuals
can live according to theirown choices and extend theirabilities to the fullest• A Japan that has realized its
third national opening in themodern era• Achievement of avibrant, integrated East
Asian economy

11

POLICY RECOMMENDATIONS AND NIPPON KEIDANREN’S ROLE
In its role as a leader and coordinator of private-sector interests in Japan, Nippon Keidanren will be amajor force in bringing this vision of a revitalized nation to reality by 2025.We will be in close touchwith the political and administrative spheres, serving as a bridge between the private and public sectors as they work together to make the nation vital and attractive. Politics and the economy are thetwo wheels of the vehicle that will take Japan into the future.This does not mean that close ties will
exist between government and business, however; we will maintain a relationship of rivalry with theJapanese government even as we help to create a strong, vibrant nation in the twenty-first century.
A Call for Strong Party Politics
It will be key in this century for political parties to regain
their position as providers of competing visions for Japan’s
policies and shape. The prime minister must also display effective, decisive leadership to steer Japan along the course it
must take. Nippon Keidanren sees the ideal form of the cabinet as a national “board of directors”—drawing on thiscorporate concept, the country’s political leaders shouldmake decisions that have genuine national interests at heart.

No longer can Japan afford a national policy based on theoften conflicting interests of different parts of the bureaucracy. The number and powers of political appointees to theministries and agencies must be increased, and politiciansmust serve alongside a larger number of civilian officials
who bring fresh, nongovernmental perspectives to the taskof running Japan.

The Keidanren Role
We will be directly involved in the process of guiding Japanin its development and its journey toward becoming the vibrant, attractive state we envision. We have a set of clear,
specific policy recommendations and a timeframe in which
to carry them out. These proposals reflect the ideas of business leaders in the forefront of economic activities, ofcourse, but we will form cooperative ties with other areas aswell, gathering concepts and proposals from the brightest
minds that think tanks and universities have to offer. In thisway we hope to develop a pool of talented, policy-minded
leaders who can participate in the decision-making process
as cabinet members or government appointees.

12

We will also lay down guidelines for our members, thecorporations and industrial organizations that drive Japan’s
economy. The activities of Japanese businesses must in the
final account support parliamentary democracy, and thebusiness sector must make its will known in ways thatstrengthen political parties with their eyes firmly on the goalof crafting policies for the sake of the nation.
In these ways, Nippon Keidanren will do its part, both politically and economically, to ensure that the Japan of is a nation infused with vitality and projecting an attractive
image to people around the globe.

© 2003

Produced by

NIPPON KEIDANREN (Japan Business Federation)

KEIZAI KOHO CENTER (Japan Institute for Social and Economic Affairs)

Keidanren Kaikan, 1-9-4 Otemachi, Chiyoda-ku, Tokyo 100-8188

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