POLICY & DIPLOMACY

Growth provides resources through increasing
corporate profits and government revenue,
which leads to distribution.

SPECIAL ADDRESS AT DAVOS AGENDA ON

A NEW FORM OF CAPITALISMJANUARY 18, 2022
Full Text: https://japan.kantei.go.jp/101_kishida/statement/202201/_00008.html

On January 18, Prime Minister Kishida attended the World Economic Forum (WEF)’s Davos Agenda
meeting, which was held online. In his special address, he introduced his vision with an emphasis on the revivalof the Japanese economy through a “New Form of Capitalism.”
Pointing out global challenges ranging from climate change to social digital transformation, a widening of
the income gap and rising poverty, he underscored his determination to lead the global trend with this “NewForm of Capitalism,” demonstrating concrete examples of how capitalism can evolve.
The prime minister also stated that in this “New Form of Capitalism,” he would achieve a “virtuous cycle ofgrowth and distribution,” by launching new mechanisms to inspire investment and change the way of sharing
added values. He also elaborated on his priority policies: establishing a green society; promoting digitalization;and investing in people, and pledged to boldly pursue the inclusive transformation of Japan’s economy and society.

Prime Minister Kishida, in a speechat the Davos Agenda meeting,underscored his determination toachieve a “New Form of Capitalism.”

Professor Schwab,Distinguished guests,
First of all, let me extend my heartfelt congratulations
on the holding of the World Economic Forum’s “DavosAgenda 2022” today.
1. Introduction
Last year, I went through some of the toughest
challenges that risked my political career. First, I ran

for presidential election of the ruling party (Liberal
Democratic Party: LDP) and won, taking the office as thePrime Minister. Then my party won the general elections
by securing a stable majority. My political style is to take anaggressive approach and introduce policies swiftly, while
placing the utmost importance to directly communicatingwith the people and workers at the frontline.
I will make the most of my approach to directly
tackle three agendas during my administration. First,

overcoming the COVID-19. Second, reviving theJapanese economy through a “New Form of Capitalism.”Third, pursuing “realism diplomacy for a new era,” taking
a realistic approach in Japan’s foreign policy while aspiring
to the ideal.
Today, I would like to introduce my vision with anemphasis on the revival of the Japanese economy througha “New Form of Capitalism.”
2. What is a “New Form of Capitalism”?
We are facing a number of challenges ranging fromclimate change, social digital transformation, widening ofincome gap and rising poverty, chronic lack of mediumto-long-term investment, disparities between urban andrural areas, democracy in crisis due to shrinking middle
classes, to unforeseen emerging tensions in geopolitics andgeoeconomics.
If we look back on history, the world has gone throughseries of eras of paradigm changes, including, for example,
endeavors to establish welfare states and big governmentsin the 1950s and 60s, as well as the rise of neoliberalism
by President Reagan and Prime Minister Thatcher inthe 1980s and 90s. Just as the same historic scale as thesetimes, I believe that we are now in an era of anotherparadigm shift in policies.
I would like to pay respect to the role this Davos Forumhas played in leading vigorous and visionary discussions
on various topics including the Great Reset and theStakeholder Capitalism.
Some people point out that “state capitalism withunmonitored concentration of authority” is efficientin conducting social reforms. However, it is proven in
history that state capitalism without a function of checks
and balances carries a high risk of large side effects both athome and abroad.
That is why I will endeavor to transform the economy
and society toward a new era, while protecting theuniversal value of democracy. In other words, my goal is toachieve the “Great Transformation of Liberal DemocraticSociety.”
The Biden administration’s “Build Back Better” aswell as the European Union’s “NextGenerationEU”
are, I believe, also initiatives to achieve the same goal of
realizing historic social transformations.
I will steadily promote economic and social reforms,
while being subject to critical judgement by ourGrowth

Public and private
sectors work
together to achieve“growth” and“distribution.”

Distribution

Distribution increases demand in consumption andin investment while strengthening the potential for
growth, which leads to further growth.

citizens through elections. In order to do this, leaders ofgovernments, industries and labor must work together togenerate a massive momentum and create a tide of history
for a global paradigm shift in policies.
Japan is determined to lead the global trend with this“New Form of Capitalism” and will demonstrate concrete
examples of how capitalism can evolve, as Japan willassume the G7 Presidency next year.
3. Efforts to revive Japan’s economy“If general perception changes from seeing the glassas ‘half-full’ to seeing it as ‘half empty,’ there are majorinnovative opportunities.”
This is the theory of the “glass half empty”, quoted by
the famous scholar in management, Peter F. Drucker.
Japan is a prosperous, peaceful country and comfortable
to live in; this is one of the reasons why people in Japantend to cuddle themselves in their own silos, satisfied,and see things as “half-full.” However, through our fightagainst COVID-19, things have dramatically changed inthis time and age.
Nowadays, every day, we feel a sense of global crises inour lives. When each person and each business share thisfeeling of “half-empty,” I am convinced, Japan will be able
to greatly transform itself with its bond of solidarity thatis inherent in our spirits.
In this “New Form of Capitalism,” I will demonstrate
to the people a clear and full picture of the historicchallenges the Japanese economy and society are currentlyfacing. Rather than leaving everything to the market andcompetition, we will focus on having both the public andprivate sectors work together towards reforms, sharing thefull picture of social and economic transformation. Japan’s

POLICY & DIPLOMACY

Japan commits itself toachieving carbon neutrality
by 2050. Fukushima
Hydrogen Energy Research
Field (FH2R) is one of thelargest facilities producing
hydrogen from renewableresources.

strong sense of solidarity becomes a foundation of a new
public-private partnership.
I will also launch new mechanisms to inspire
investment and change the way of sharing added values.
I will integrate them into both growth and distribution
strategies to achieve a full-scale “twin-engine of growthand distribution.”

Emissions Community” in Asia where both geopoliticaland geo-economic challenges are intensifying. Thiscommunity would become a platform to advance efforts
such as international joint investment on development ofzero-emission technologies and hydrogen infrastructure,joint financing, standardization of related technologies,
and establishment of an Asian emissions trading market.

4. Transformation of economy and society(1) Green society
To fulfill the Paris Agreement, Japan has committed
itself to the goals of achieving 46 per cent reduction inemissions by Fiscal Year 2030 and carbon neutrality
by 2050. The journey to achieving these goals is
extraordinarily challenging. Japan does not haveinternational grid connections. There remains strong
public distrust of nuclear power following the accident
in Fukushima. The cost of renewable power generation isinevitably high because Japan is an insular state with steep
mountains and surrounded by deep sea. These factors
create vulnerability in the Japanese economy.
In order to overcome such vulnerability on the supplyside, the private and public sectors will intensively work
together to transform and innovate toward a carbon
neutral society on both demand and supply side.
Our efforts include institutional reforms andsupporting policy in order to double investment as earlyas possible, as well as accelerating the development ofnext-generation grids. In addition, I will also work on
carbon pricing and labor market reforms to transform
industrial structure and individual consumption. Japanis determined to boldly adopt policies that have been
politically difficult in the past, against the backdrop of thepublic’s sense of urgency to tackle climate change.
I am also aware that many Asian countries have energy
structures that are similar to Japan. Just as the EuropeanUnion started as the European Coal and Steel Community
during the Cold War, Japan envisions an “Asia Zero(2) Digital
Another important pillar is digitalization. In Japan,
progress in digitalization had been insufficient. People inJapan did not really feel a pressing need for transformation,and just wanted to keep the way of working they were used to.
The COVID-19 pandemic, however, sparked many
people once again how far behind we are in digitalization
while realizing the convenience of digital technologies. Inaddition, we realized that the power of digital technology
is indispensable in solving Japan’s social problems amid
rapid progress of depopulation of rural areas and an aging
population.
Now is a “chance” for Japan. Taking this opportunity,
I will push forward Japan’s digitalization at a stretch. The
key to this is infrastructure.
Japan will build submarine cables around the country as
well as optical fiber networks throughout the archipelago.
In order to prepare for the surge in data processing withthe advent of the full-scale digital age, Japan will disperse
large-scale data centers throughout Japan. In addition,
Japan will promote next-generation networks using
optical communication technology that is 100 times
faster in speed and reduces electricity consumption to onetenth.
An autonomous drone carries a box
containing hot meals for a field test of fooddelivery in Tokyo in November 2021. AFLO

Japan’s public and private sectors will jointly set
numerical targets and develop such infrastructure in aplanned manner. Japan will make it possible for people
to use ultrahigh-speed and large-capacity lines on a “oneperson, one line” basis.
As our existing systems do not meet the needs of
new businesses and services, my government will review
40,000 regulations and systems under the new guiding
principle of digitalization, which set up the principlesof how Japanese society is to be digitalized. I consider it
important to create a new market by setting new ruleswith an eye on frontier technologies like drones andautomated driving as well as recent developments in suchareas as healthcare and education.
In addition, I will take the “Data Free Flow with Trust(DFFT)” that Japan proposed three years ago in Davosanother step forward. Based on trust as a foundation,
we will realize a free flow of data which will bring about
innovation and bridge the wealth gap.
(3) Investment in people
Investment in people is the key to achieve both a carbon
neutral society and digitalization. In our time, creativity
and ingenuity of human beings provide the clue to solving
problems and the source of innovation.
For years, Japanese companies have tried vigorously
to curb cost and supply cheaper products than theircompetitors. In this endeavor, “investment” in people
has often been regarded as a cost. As a result, wage levelremains stagnant, and investment in human resources
development has also been limited.
As we move forward, we must build a virtuous cycle
where investment in people leads to continuous increasein company value and attracts further investment in
human capital. The government will introduce systems
to support human capital that fits this age of digitaltransformation, such as creating new employability skills
training program, promoting the appointment of female
executives, and utilizing side businesses.
In doing so, it is important to create a common
understanding not only among business people but
also with market players that investment in people
is a source of corporate value. This is essential increating a system that attracts more funds to companies
that promote medium-to-long-term corporate valueenhancement. To this end, Japan will create a disclosure

Sitting down to talk with a groupof auto mechanics, Prime Minister
Kishida said that raising wages
would be an investment in growth.

system for investments in non-financial assets such as
human capital.
5. Toward a sustainable Japanese economy
Japan’s “Abenomics” was based on the three pillars ofmonetary easing, fiscal expansion, and growth strategies,
including global standard corporate governance. As aresult, the Japanese economy is no longer in a deflationary
situation, and has achieved the expansion of women’slabor participation and employment.
“Abenomics” achieved great results, but it is clear thatthe efforts made thus far are not enough to transform theJapanese economy into a sustainable and inclusive one.
My cabinet will build on Abenomics’s achievements
regarding macroeconomics and market, and boldly
pursue the transformation of Japan’s economy andsociety, including green transformation and digitaltransformation.
Against the backdrop of the people’s sense of crisis, I will
design and implement a mechanism that will bring out thepeople’s endeavor and promote investment, especially, inthe areas of vulnerability in the Japanese economy.
6. Conclusion
The time to design a world beyond the Great Resetcannot wait.
To open up this new era, it is vitally important to haveas many people as possible to connect amongst each otherbased on trust through continual conversations whichtranscend differences in values, circumstances and views.
The Davos Forum has embodied such spirit andattracted political and economic leaders from all over theworld for a long time.
I am convinced that there is heightened importancefor both political and economic sectors to discuss publicaffairs and act together beyond their differences. In thiscontext, this Forum will become even more significant.
Finally, I would like to conclude my remarks by wishing
the continued success of Professor Schwab and the membersof the World Economic Forum as well as all the guests.
Thank you very much for your attention.