Introduction
The Japanese economy is regaining its strength. The real rate of growth has been positive
for four consecutive years since fiscal year (FY) 2002, the employment situation has
improved considerably, and the prolonged period of deflation is breathing its last. In thecorporate sector, progress is being made in the efficient allocation of management resources,
returns on assets are improving, and profit margins are also recovering. In the government
sector, meanwhile, structural reforms such as the reforms of the financial system andpension system are making progress.
Nevertheless, to ensure that robust growth is sustained, Japan must innovate itself("Innovate Japan"). During the next decade, Japan is expected to experience furtherglobalization and to face rapid aging and falling birthrate as its population declines.
Keidanren will be resolute in pursuing not only technological innovation but also theinnovation and reform of the economy and society and of the foundations that underlie
them, including education and the relationship between central and local governments. Ouraim is to transform Japan into a "Land of Hope" that is open to the countries and peoples ofthe world by 2015.
Below, we set out the shape that the Land of Hope should take, and the measures to be taken
to achieve it.

1The Shape of the Land of HopeCharacteristics of the Land of Hope
A nation of abundance and spiritual fulfillment
People who live in Japan will be able to lead their lives with peace of mind, supported byassured growth and by social bonds. In a social climate that appreciates diversity, people'sindividual values will be respected, and individuals may think and act independently. Safetyand security of the community will be assured by means of mutual support and anti-crimemeasures.
Open opportunity and fair competition
People will have the opportunity to strive to achieve their own success according to theirability and motivation. Opportunities to take up any challenge will be open to everyone,
including people who come to Japan from overseas. Success achieved through competition
will be duly and fairly rewarded. There should be no obstacles that hinder the comeback ofpeople who have failed, the reemployment of young people and women, active participation
in society by elderly people, and reeducation and retraining for adults. And for people
whose misfortune renders them unable to compete, a minimum safety net will be in place.
Respect and friendship from countries worldwide
To contribute actively to the peace and prosperity of the world, Japan will engage instrategic diplomacy in which its alliance with the United States plays a pivotal role. It willcontribute in particular to the strengthening of the international trading system and to theresolution of problems that are common to all of humanity, such as those in the fields ofenergy, the environment, and poverty. Japan should also make an effort to bring stability inthe situation of international security.

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Economic and financial structure of the Land of Hope〔Japan in 2015〕
After the bursting of bubble economy, Japan's growth rate remained low, hovering at anaverage real rate of just over 1%. However, by steadily implementing reforms aimed atenhancing potential growth, the Japanese economy will grow at an average rate of 2.2%
annually during the period from 2006 to 2015. National income per capita in 2015 isforecast to increase by some 30% from its level in 2005.
With respect to the current fiscal situation in Japan, the total public debt at national andlocal level stood at more than 150% of GDP in FY 2005, as a result of factors such asincreased social security spending caused by the aging of the society, and tax cuts that wereenacted to revive the sluggish economy. It is the worst level among the major industrializedcountries. However, by advancing the reform of government revenue and expenditure, thetotal public debt should be reduced by more than 20 percentage points by FY 2015, andshould subsequently continue to decline in a stable manner.
In addition, a lean and efficient government will be created. The ratio of the sum of thesocial security burden, tax burden, and budget deficit to national income will remain at alevel below 50%.

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Next Steps : To Realize the Land of Hope
Achievement of sustained growth
Japan will devise a growth model that will make possible the achievement of high economic
growth despite the declining population, and with this model, Japan will contribute to globalgrowth. On the supply side, it will maintain total factor productivity at an annual rate ofincrease averaging over 1.5% by fostering innovation, the driving force of growth. To that
end, the government and private sector will take steps such as strengthening intellectual
property policy. High-quality human resources will also be nurtured by promoting
industry-academia collaboration and by accepting overseas students to study in Japan.
Productivity will be raised through regulatory reform and the use of ICT. Additionally, togenerate and augment demand, Japan will expand existing markets that have a strong
competitive edge, and will ensure the creation and expansion of markets with further growthpotential, such as housing, digital content, tourism, and household support services.
In parallel with the above, Japan will overcome factors that may otherwise constrain its
growth through foreign policy efforts and technological strength, for example, by
establishing energy security and addressing global environmental problems.
Giving full play to Asia's dynamism
Japan will further invigorate the economy of Asia, which is already achieving remarkable
growth, and assist in the realization of global economic growth. Based on the fact that Asia
has realized its economic growth through dynamic trade and investment activity, Japan will
demonstrate leadership for a successful and ambitious outcome of the WTO Doha
Development Agenda and the conclusion of an economic partnership agreement (EPA) thatencompasses the whole of East Asia. This EPA will create a seamless economic environment
within Asia and guarantee free economic activity, at the same time giving rise to a massive
market. Japan will also contribute to raising the base level of the Asian economy by sharing
its technologies and experience in the fields of the environmental protection and energyconservation, by increasing access to its domestic markets including agriculture, and byextending economic cooperation to vitalize trade and investment.
Japan will play the role of a gateway through these efforts and become a conduit between
Asia and the rest of the world. The creation of an open, regional "East Asian community"that shares economic prosperity while embracing diversity is in the foreseeable future.

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The conclusion of EPAs with the United States and other strategically important nations
such as the GCC countries and Central and South American countries is also essential.
Furthermore, the importance of economic cooperation is not confined to Asia. Japan willcontinue to engage actively in economic cooperation, and will maintain its status as theworld's number-two donor country.
Building a robust fiscal structure
To achieve fiscal consolidation, Japan will give first priority to the reform of government
spending. In order to achieve this goal, the review of the public-servant system and theadministrative structure and the rationalization of the public sector through regulatory
reform and public-private partnership should be advanced. With respect to the rapidexpansion of social security spending resulting from the aging of the population, theincrease in benefit payments will be restrained by introducing social security numbers andnarrowing of priorities, so that the sustainability of the system is assured.
A tax system that encourages sound economic activity will be created at the same time. The
present tax system that relies heavily on direct taxation should be amended. To assureinternational equal footing, the effective corporate tax rate will be reduced to a level ofaround 30% from its current level of approximately 40%. In regard to personal income tax,
the graduation of the tax rates will become more moderate. Consumption tax, currently 5%,
which is one of the lowest levels worldwide, will be increased by approximately 2
percentage points by FY 2011.
Enhancing the autonomy of local government and reforming the labor market
By 2015, steps will be taken to consolidate and reduce the number of local government
bodies, to decentralize central-government powers and funds, and to shift the populationand industry from central to local. Doing so will enable local government bodies to manage
local issues more efficiently and effectively, and to develop their local areas by giving fullplay to distinctive regional characteristics.
Japan is approaching the period when its baby boomers born between 1947 and 1949 are toretire. However, by developing systems of remuneration in accordance with job role andperformance and by promoting the introduction of human resources from overseas, theestimated reduction in the labor force of 4 million people by 2015 will be held at only 1
million. The fact that at present the average number of births per woman in Japan is only1.26 will be lifted to 1.5 by 2015, by means of comprehensive measures, including theprovision of support for women to enable them to hold jobs while raising children.
5Strengthening social bonds
For resource-poor Japan, the development of human resources is important. To this end,
public education will be further improved and the level of scholastic achievement inprimary and secondary education will be maintained at the highest level in the world.
In order to build a sound, vibrant society, every citizen will share a charitable attitude that
motivates them to help promote the nation's welfare. To nurture such an attitude, education
will be enhanced accordingly not only in schools, but also in the home and in thecommunity. Companies, too, as members of society, will not only practice ethical corporate
behavior but will devote their energies to corporate social responsibility.

6KEIDANREN (Japan Business Federation)

Keidanren Kaikan, 1-9-4 Otemachi, Chiyoda-ku, Tokyo 100-8188
Phone 81-3-5204-1500
Email webmaster@keidanren.or.jp
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