Provisionaltranslation

Grand Design and Action Plan for
a New Form of Capitalism
2023 Revised Version

June 16, 2023

Grand Design and Action Plan for a New Form of Capitalism
2023 Revised Version(Table of contents)

Ⅰ. A New Upgrade for Capitalism................................................................. 1

1. Concept of the revision of the Grand Design and Action Plan for a New Form of Capitalism........................................................................................................................................ 1
2. The correction of market failure and defense of universal values ....................................... 2
3. Finding solutions and new markets and growth, and achieving sustainable well-being forthe citizens, through “both the market and the state” approach ..................................... 2
4. Economic security ................................................................................................................ 3

Ⅱ. Approach to the Achievement of a New Form of Capitalism ................ 3

1. The elimination of barriers to distribution to achieve further growth .................................. 3
2. Securing power for growth through public-private collaboration driven by technologicalinnovation ....................................................................................................................... 4
3. Achieving a society in which the private sector plays a public role .................................... 4

Ⅲ. Investment in People/Structural Wage Increase and the Guidelines for
Integrated Three-Pronged Labor Market Reforms............................. 5(1) Basic concepts of the Guidelines for Integrated Three-Pronged Labor Market Reforms..................................................................................................................................5(2) Goals ................................................................................................................................6(3) The direction of reform ....................................................................................................6(4) Support for improving abilities through re-skilling .........................................................7(5) Introduction of job-based wages according to the actual conditions of individualcompanies .................................................................................................................9(6) Facilitating the movement of labor to growth areas ......................................................12(7) Respecting diversity and correcting disparities .............................................................14(8) Reforming the system for training and evaluating national public employees .............17(9) Matters relevant to the Guidelines for Integrated Three-Pronged Labor Market Reforms................................................................................................................................17

Ⅳ. Investment in GX and DX, etc. ............................................................ 18

1. Japan’s advantage in resilience and promotion of domestic business locations, attracting
highly-skilled international professionals .................................................................... 18(1) Approaches to promoting domestic industry locations and strategic fields ..................18(2) Measures for strategic fields (Semiconductors, batteries, biomanufacturing, data centers,etc.) .........................................................................................................................19(3) Cross-sectional environmental development .................................................................20(4) Attracting highly-skilled international professionals.....................................................21
2. GX and energy security ...................................................................................................... 21(1) Decarbonization initiatives towards GX based on the premise of ensuring a stable energy
supply......................................................................................................................22(2) Realizing and implementing Pro-Growth Carbon Pricing Concept ..............................26(3) Strategies for international expansion ...........................................................................27(4) Promoting GX throughout society .................................................................................28(5) Efficient and circular use of resources...........................................................................28

3. Food security ...................................................................................................................... 28(1) Establishing food security..............................................................................................28(2) Greening agriculture, forestry and fisheries ..................................................................29(3) Expanding exports of agricultural, forestry and fishery products and foods .................30(4) Smart agriculture, forestry, and fisheries industry.........................................................30
4. AI ...................................................................................................................................... 30(1) Responding to risks and the international discussion ....................................................31(2) Promoting the use of AI.................................................................................................31(3) Strengthening AI development capabilities ...................................................................31(4) Strengthening the government’s study framework ........................................................32
5. DX ...................................................................................................................................... 32(1) Developing the environment for promoting Web 3.0....................................................32(2) The realization of post-5G and 6G ................................................................................33(3) Developing the environment for promoting the investment in DX ...............................33
6. Promoting science, technology and innovation through public-private collaboration....... 35(1) Quantum technology......................................................................................................35(2) Health and medical care.................................................................................................36(3) Fusion energy innovation strategy .................................................................................37(4) Strengthening research and development capabilities of national research institutions37(6) Support for the regional core and distinctive research universities ...............................37(8) Exchange of international students ................................................................................38(9) Moonshot research and development ............................................................................38(10) Support for doctoral students, young researchers, etc. ................................................38(11) Promotion of IoT .........................................................................................................38(12) Expo 2025 Osaka, Kansai, Japan.................................................................................39
7. Support for creators ............................................................................................................ 39

Ⅴ. Facilitating the Entry and Exit of Corporations, and Promoting theStartup Development Five-year Plan ................................................. 39

1. The necessity of reforming the industrial structure and facilitating the entry and exit ofcorporations .................................................................................................................. 39
2. Promoting the Startup Development Five-year Plan.......................................................... 40(1) Basic concept .................................................................................................................40(2) Targets ...........................................................................................................................40(3) Package direction ...........................................................................................................40(4) Building Human Resources and Networks for Startup Creation ...................................41(5) Enhancing Funding provision for Startups and Diversifying Exit Strategies................47(6) Promoting open innovation............................................................................................54
3. Comprehensive support measures and facilitating the exit, including business restructuring
and business succession, etc. in the case of a business slump ..................................... 55(1) Establishing early consultation systems and other institutional arrangements when
corporate managers wish to exit .............................................................................56(2) Developing legal systems for business restructuring.....................................................56(3) Financing that focuses on companies' business feasibility ............................................56

Ⅵ. Building Economic and Social Systems for Solving Social Issues .... 57

1. Comprehensive support measures for impact startups ....................................................... 58
2. Support for NPOs and public interest corporations that solve social issues ...................... 59
3. Strengthening advocacy functions of the competition authority........................................ 60

4. Strengthening concessions (including PPP/PFI) ................................................................ 60

Ⅶ. Doubling Asset-Based Income Plan and the Formation of a Broader
Middle Class ........................................................................................ 61

1. Promotion of the Doubling Asset-based Income Plan ....................................................... 61(1) Basic concept .................................................................................................................61(2) Goals ..............................................................................................................................62(3) NISA system ..................................................................................................................62(4) iDeCo system .................................................................................................................63(5) Creating a system to encourage the provision of neutral and reliable advice to consumers................................................................................................................................63(6) Enhancing asset formation for employees .....................................................................64(7) Enhancing financial and economic education ...............................................................64(8) Realization of an international financial center open to the world ................................64(9) Stimulation of financial and capital markets .................................................................64(10) Globalization of financial administration and tax systems ..........................................66(11) Improvement of the living and business environment to support highly skilled foreign
financial-related human resources ..........................................................................66(12) Ensuring customer-oriented business conduct.............................................................66
2. Promotion of efforts to become an asset management nation ............................................ 66

Ⅷ. Multipolarization of the Economy and Society.................................. 66

1. Realizing the Vision for a Digital Garden City Nation ...................................................... 66(1) Infrastructure development for the realization of the Vision for a Digital Garden City
Nation and improving the living environment in hilly and mountainous areas .....66(2) Development of regional transportation, healthcare, and education to support the Digital
Garden City Nation .................................................................................................69(3) Ensuring security as a precondition for Vision for a Digital Garden City Nation ........70
2. Promotion of overseas business investment by Japanese companies ................................ 73

Ⅸ. Promoting Inbound Tourism by Taking Advantage of Japan's
Attractiveness ...................................................................................... 73(1) Maintaining content .......................................................................................................73(2) Facilitating acceptance...................................................................................................73(3) Destination management ...............................................................................................74(4) Culture and the arts ........................................................................................................74(5) Sports .............................................................................................................................74

Ⅹ. Initiatives in Individual Fields .............................................................. 74

1. Space .................................................................................................................................. 75
2. Oceans ................................................................................................................................ 75
3. Promoting external economic partnerships ........................................................................ 76
4. Global Health ..................................................................................................................... 76
5. Creation of new industries in Fukushima and other north-eastern regions ........................ 76

Ⅺ. A Framework for the Realization of New Capitalism ........................ 77

1. Following-up ...................................................................................................................... 77
2. Cooperation between public and private sectors ................................................................ 77

Ⅰ. A New Upgrade for Capitalism
1. Concept of the revision of the Grand Design and Action Plan for a New Form of
Capitalism
Based on the Grand Design and Action Plan for a New Form of Capitalism determined by
the Cabinet in June last year, specific policies related to the new form of capitalism havesteadily progressed in the last year. These include:- Implementing planned intensive investment in the four pillars of people; science,technology, and innovation; startups; and GX (green transformation) and DX (digitaltransformation);- Based on the Startup Development Five-year Plan determined in November last year,
implementing one trillion yen budgetary measures, developing a tax system thatencourages investment in startups and expanding the open innovation promotion tax
system;- Based on the Doubling Asset-based Income Plan also determined in November lastyear, major expansion of and making permanent NISA (Nippon Individual Savings
Account, tax exemption program for small investment) , and taking measures tocreate a neutral advisory system for consumers;- And determining the Guidelines for Integrated Three-Pronged Labor Market
Reforms in May this year, consisting of re-skilling, introducing job-based wages, andfacilitating labor movement.
In the private sector as well, there has been definite progress vis-à-vis the challenge of cutting
off the vicious circle seen in the past, including high-level wage increases for the first time in
30 years and a high desire to invest fostered in the corporate sector.
The Grand Design and Action Plan for a New Form of Capitalism is the government's multiyear plan that aims for a virtuous cycle of growth and distribution.
On the other hand, to put Japan on a new growth trajectory, the necessity has become clear
in the past year to further accelerate efforts to address the issue of slowing investment in people
and capital investment against a background of various structural problems in the Japanese
economy, including the curtailment of the domestic market due to the rapidly decreasing birthrate and aging society, management structures with an emphasis on shares in existing markets,and the inflexibility of the labor market and corporate organization. Thus, to ensure the current
continuous high wage rises, we aim to secure a mark-up ratio by passing on costs in an
appropriate manner, and to realize structural wage increases by implementing the integrated
three-pronged labor market reforms, leading to a virtuous cycle of pay and commodity prices.
In addition, fields in which there tends to be too little investment if left to the market orcompetition, such as investment in people, promoting domestic industry locations thatleverage Japan's advantages in resilience, and investment to realize GX, will see goal-focused
public expenditure by the government, which will serve as stimulation to expand private
investment.
Based on these perspectives, the Grand Design and Action Plan for a New Form of
Capitalism has been revised and approved by the Cabinet.
Through a new form of capitalism, the public and private sectors will collaborate totransform social issues into an engine of growth, thus creating a virtuous cycle of growth anddistribution in which economic added value is increased as companies distribute higher
earnings to workers, consumption and corporate investment expands, and further economic
growth is created; this will restore a broader middle class.

12. The correction of market failure and defense of universal values
The idea of Neoliberalism, that things would work if one left them up to the market andcompetition, arose from the 1980s to the 2000s, and the global economy grew significantly as
economic vitality returned with the spread of globalization. Neoliberalism can be said to haveplayed a role in driving that growth.
At the same time, countless hurdles have also emerged during that time, such as expanding
economic disparity, the worsening of climate change, increasing risk to economic security due
to excessive dependence on foreign countries, growing urban problems due to population
concentration, and market failure. In the supply chains that depend on specific countries andregions, crisis management risks are increasing in different countries—as it is becoming clearthat it is not possible to ensure the health of citizens or the economic security of the nation.
Furthermore, the current Russian invasion of Ukraine has also revealed geopolitical risks to
the international economy and rising challenges from authoritarian states. Freedom anddemocracy are facing challenges from this authoritarian state capitalism.
3. Finding solutions and new markets and growth, and achieving sustainable well-being
for the citizens, through “both the market and the state” approach
Capitalism has undergone two major transformations in the past. During the two world warsof the 20th century, Laissez-faire was replaced with the concept of the welfare state in which
the government emphasized social welfare. Then, during the subsequent cold war geopoliticalstructure, the concept of neoliberalism arose to rebuild the economy that was losing
competitiveness. We now face the third major transition in the history of capitalism, and must
proceed with transformation to achieve a new form of capitalism, or in other words, the fourthstage of capitalism.
The only system that can surpass capitalism is capitalism itself, and the leaders are always
the people and the market.
However, whereas previous transitions have involved a fundamental swing of the pendulum
between market or country, and public or private, under the new capitalism, we must endeavor
to solve the emerging social problems that cannot be solved by the market alone, involving
considerable externalities, through an approach of “both the market and the state”, or in otherwords, through new public and private cooperation.
In doing so, we must perceive the challenges not as hurdles, but as sources of energy as wefind solutions to these social problems through new public and private cooperation, and to use
and include those sources of energy to achieve growth.
And this new form of capitalism must achieve sustainable well-being for all citizens. The
fruits that will come in the form of solutions to social problems through public and private
cooperation, and the new market creation and growth that will result thereof, must realize avirtuous cycle of growth and distribution, and must be fed back and shared widely to thecitizens, regions, and domains. In addition, through initiatives to tackle such social problems
as climate change and the declining birthrate and aging population, we must rebuild asustainable socioeconomic system that connects to the lives of the citizens and leaves no one
behind in order to take the lead in international society.
As described above, the basic ideas that lie at the heart of this new form of capitalism are:1) for solutions to be found by both the market and the state, and both the public and private
sectors; 2) to create new markets through the solving of social problems, or in other words, toachieve solutions to those problems along with economic growth; and 3) to improve the livesof the citizens and to achieve sustainable well-being for all through the finding of solutions toproblems.
Notably, to increase the sustainability and resilience of capitalism and ensure that all people2receive the benefits of growth, it is necessary for the public and private sectors to collaborate
on a large scale with a focus on areas that are difficult to tackle for the market alone, such as
investment in people, the development of startup companies, and the development of advanced
technology. This collaboration is critically important for Japan considering that we are facing
a coming shortage of labor due to the declining birthrate and aging population.
For this, we need to expand support for child-rearing, realize social security through whichcitizens support each other in accordance with their abilities as the birthrate declines andsociety ages, and reform workstyles to enable ways of working anytime and anyplace that aredesirable for all. It is also important to pursue a society with a decentralized economy, in whichauthority, wealth, and resources are not concentrated.
In addition, as part of the collaboration, we must strengthen the foundations for contribution
by women across the board, such as through promoting economic autonomy by correcting thewage gap between men and women, in order to secure diversity for the economy and societyof Japan and thereby lead to further innovation.
4. Economic security
National security is a fundamental requirement for the achievement of a new form ofcapitalism that will bring prosperity to the citizens. Taking into account the outcomes of theG7 Hiroshima Summit, we will promote strategic diplomacy and security, as well as economic
security that will make Japan's economy resilient, and energy and food security. In addition,
under this new form of capitalism, we will work to secure not only diplomacy and defense,but sustainable and inclusive safety and security in the daily lives of the citizens.
Finally, against the rise of authoritarian nations, it is necessary for nations that emphasize
universal values such as freedom, democracy, human rights, and the rule of law to rally
together to maintain and strengthen a free and open economic order and promote free trade,while strengthening their response to unfair economic activities. To accomplish this, we will
use the opportunity of the G7 Hiroshima Summit and other events to take the lead in theformation of an international consensus for policy management and in discussions on
strengthening cooperation with like-minded countries.

Ⅱ. Approach to the Achievement of a New Form of Capitalism
1. The elimination of barriers to distribution to achieve further growth
Capitalism has brought economic growth through the engine of the market mechanism, andthe new form of capitalism must thoroughly pursue further growth. However, further growthcannot be realized if we do not appropriately distribute the fruits of growth so that it may beinvested in yet further growth. Distribution is not a cost, but investment in sustainable growth.
In Japan, there has been “clogging” for a long time, such that the fruits of growth are notbeing appropriately distributed to local areas and business partners and furthermore, are notbeing adequately allocated for further research and development, capital investment, andemployee compensation. This “clogging” has come to inhibit further growth. Over the lastyear, efforts to resolve “clogging” through active collaboration between the public and private
sectors have yielded results, and it is necessary to further strengthen these efforts in this second
year.
The formation of an ample middle class is important for the healthy development of
democracy, and the enrichment of the middle class, which will also play the central role in theeconomic society of the new form of capitalism, will help avoid the expansion and ossificationof economic disparity and achieve a sustainable economic society. For this purpose, we must3

ensure the distribution of both flows, in terms of wage increases and optimizing business withSMEs, and stock, in terms of education and asset formation, while promoting sustainabledistribution through support for digital investment to prepare for the coming era of labor
shortages.
2. Securing power for growth through public-private collaboration driven bytechnological innovation
Each country is making bold investments in innovation to rebuild their economies and social
systems in the post-Covid society because innovations contain potential solutions for countless
problems facing society, while also serving as the source of competitiveness in a new age.
However, research and development investment and capital investment in Japan has lagged
far behind that of other countries.
It is essential for Japan to also promote innovation boldly through new public and private
collaboration to further accelerate upgrades to our nation’s economy and social systems, andto boldly shift from competitiveness based on cost cutting to that based on the creation ofadded value by securing mark-ups.
Furthermore, in this age of digital transformation (DX) and green transformation (GX),
where ideas are being put into practical use at a high speed and new technologies are rapidly
being updated, the importance of intangible things against tangible things, of intangible assets
against tangible assets, is growing as the source of competitiveness, rather than the traditionalsource of machinery and equipment. In such times, creative innovation and economic growth
emerge from the maximization of human capabilities. Therefore, it is essential to realize asociety in which all people, including women, youth, and the elderly, can each exercise theirknowledge and experience, and to continuously work to improve their skills through generous
investment in people.
3. Achieving a society in which the private sector plays a public role
It is difficult for many of social problems to be solved with the government solely in thelead. In order to encourage society as a whole to engage in solving its problems, we must aim
to become a society in which the private sector can take the lead in tackling the problems weface. For that, we must rethink market rules and laws to reward contributions to solve those
problems, and by doing so, induce a flow by which funds and people gather at companies
according to the size of their contributions. We will work to develop intellectual propertysystems and standards, constantly review regulations, develop a digital market environment,
and respond to economic security including creating international rules.
Furthermore, in addition to existing companies, it is essential to diversify actors engaged insolving social problems to include startups, universities, and NPOs; this will achieve a society
in which the private sector takes on a public role. There has been a particular rise in recent
years in individuals aiming to create impact startups (social entrepreneurs) that focus on tackling
the problems of society, such as child rearing and environmental problems. Accordingly, we
intend to provide full support to the initiatives of these social entrepreneurs as a new form of
public-private partnership. From this perspective, we must consider “impact” in addition to“risk” and “return” in order to include “problem solving” as an additional indicator forevaluation under capitalism.
One of the keys to that problem solving is the use of digital technology. It is important toenable the use of digital technology to solve problems by upgrading regulations and systems
to match the digital age, and to promote competition policy to ensure fair competitioncommensurate with the new age in order to enable the private sector to maximize its
capabilities.

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Ⅲ. Investment in People/Structural Wage Increase and the Guidelines for
Integrated Three-Pronged Labor Market Reforms(1) Basic concepts of the Guidelines for Integrated Three-Pronged Labor Market
Reforms
The way we work has changed significantly. We are moving from an era in which "careers
are given by companies" to an era in which "each individual chooses their own career." It is
important that we shift to a system which allows workers to re-skill of their own will and tochoose their jobs by clarifying the skills required for each job. By doing so, it will be possible
to seamlessly connect the internal labor market and the external labor market, thereby opening
the door to hiring experienced workers from outside a company and enabling workers to freely
move both inside and outside of their company according to their own choice. This is also anurgent matter for the further growth of Japanese companies and the Japanese economy.
Wage levels in Japan have been stagnant for a long period of time (looking at the change inreal wages per person in developed countries from 1991 to 2021, we can see that the growthrate of real wages per person remained low in Japan at 1.05 times, compared to 1.52 times in
the U.S., 1.51 times in the UK, and 1.34 times in France and Germany1). During this period,
companies have not invested enough in people, and individuals have not engaged in adequate
self-development.
New trends such as GX and DX will also greatly change required skills and labor demand.
As we enter the era of 100-year lifespans, working periods are becoming longer, and, with thecycle of rise and fall in various industries progressing in short periods of time, everyone willneed to work to acquire new skills throughout their lives. On the other hand, it has also been
pointed out that, in reality, many working individuals tend to take a passive attitude andbecome comfortable in their current situation.
Behind this problem lies the employment system in Japan that formed after World War II,
such as the seniority-based wage system. Jobs and the skill standards required for them arealso unclear, so objectivity and transparency in evaluations and wages are not sufficiently
ensured. Because it is difficult for individuals to understand how they will be rewarded fortheir efforts, in addition to low engagement it is difficult for them to change jobs, and, even if
they do change jobs, it is difficult for this to lead to an increase in their salary. Additionally,
even if individuals are motivated, fairness in access to opportunities to improve their skills andto learn is not sufficiently ensured.
In the face of labor supply constraints due to the declining population, it is necessary toreform this system to create a society in which individuals who wish to do so, irrespective of
employment status, age, gender, or disability, while understanding the future labor market
situation and the working style options within it, can choose their own living and working
styles and can voluntarily, proactively learn and be rewarded for improvement of theirtreatment via promotions or salary raises within their company or by changing to a job at adifferent company, and furthermore realization of labor mobility for startups, etc.
There is no time to wait for change from the corporate side either. As companies have notbeen investing enough in people, the wage gap with other countries has been widening, and in
the competition for human resources there is a risk that Japan will fall behind not only amongdeveloped countries, but also in Asia. An increasing number of companies are introducing jobbased personnel systems from the perspective of competition to acquire human resources,
primarily in industries and companies that are competing in the global market, but they are notdoing so sufficiently quickly, and, with the recognition that human capital is the key toimproving corporate value, it is necessary to urgently respond to change and to drasticallystrengthen investments in people.
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In this kind of transformation, the relationship between workers and companies will change
to one of "choosing and being chosen," with both sides on equal footing. With each individual
taking a leading role and with the cooperation of the public and private sectors, it will benecessary to change from an era in which careers are provided by companies to an era in which
each individual builds their career as they wish.
To this end, we will carry out an integrated three-pronged labor market reform: supporting
skill improvements through re-skilling, introducing job-based wages according to the actual
conditions of individual companies, and facilitating the transfer of labor to growth fields. It isimperative that companies shift to an employment system that ensures objectivity,transparency, and fairness, and in this way, we will create a mechanism that structurally
increases wages.
Additionally, in order to implement structural wage increases, the key will be the responses
of local governments and small and medium-sized enterprises (SME) and small businesses,
which account for 70% of Japan's employment and GDP. In parallel with this integrated threepronged labor market reform, we are working to improve the productivity of low-productivity
companies, and as it was basically agreed upon in the exchange of views between thegovernment, labor, and management on March 15 of this year, we will share throughout
society the idea that "in order to raise wages at SMEs and small businesses, it is essential tooptimize transactions by appropriately passing on labor costs," and will also be necessary tosecure funds for wage increases and to thoroughly implement price pass-through measures torealize a virtuous cycle of growth and wage increases.
In addition to this, through these efforts and efforts to support productivity improvements,
we will take measures to address regional labor shortages and to raise the minimum wage sothat working individuals can live with peace of mind.
An internationally competitive labor market will be created through bold efforts by the
public and private sector to implement these reforms.
(2) Goals
By promoting an integrated three-pronged labor market reform, through structural wage
increases and we aim to narrow the wage disparity 2 that exists between Japanese and foreigncompanies despite the fact that they are holding the same occupation, while taking into
account the differences in economic conditions in each country. In addition, we aim toeliminate wage disparities due to factors such as gender and age.
In the case of Japan, a comparison of wages before and after job changes shows thatwages tend to decrease after individuals change jobs. As such, through the formation andseamless connection of internal and external labor markets, we aim to have the proportion ofindividuals whose wages increase due to a job change exceed the proportion of those whose
wages decrease.
The public and private sectors will confirm the progress of these initiatives and move
forward with reform efforts.
(3) The direction of reform
In promoting this integrated three-pronged labor market reforms, it is important, as aprerequisite, to ensure and expand the functions of the employment safety net, including reskilling support during employment and strengthening consulting and advisory functions, etc.,
and, while utilizing the power of the private sector, the public and private sectors must work
together to strengthen re-skilling and matching functions. In doing so, the following threeperspectives are important.
1) Only when the internal labor market is revitalized through personnel and wage system6reforms within companies will the external labor market (that is, the labor market as awhole) also be revitalized. Based on the recognition that human capital is the key toimproving corporate value and according to the actual conditions of individual companies,
with the review by labor and management of personnel and wage systems within companies
will be positioned at the core of the reforms, and in addition to gradually dispelling concerns
about labor mobility, through measures such as drastically strengthening investments inpeople we will increase the number of companies that attract human resources who will
return to them in the future, even if they change jobs at some point.
2) Amidst the changing realities of employment practices in Japan, these reforms are an
attempt to achieve structural wage increases while preserving employment stability forworking individuals. From the standpoint of working individuals, we will ensure theprovision of diverse careers and choices in treatment as an employee by ensuring smoothlabor mobility.
3) These reforms will also lead to growth opportunities for SMEs and small businesses. If, forexample, personnel systems within large companies become more flexible, then experiencethrough secondment to SMEs and small businesses for a certain period of time, side jobs,
and multiple jobs will come to be objectively recognized as skills. Human resource
exchanges between large companies and SMEs and small businesses will become even more
active, leading to human resources support for SMEs and small businesses in regions facing
labor shortages. In conjunction with this, by thoroughly taking measures to pass on laborand other costs, we will take all possible measures to ensure that the earnings of SMEs andsmall businesses and that this will lead to wage increases. Additionally, by enhancing
support for re-skilling, etc., we will cut off the negative spiral in which economic disparities
create educational disparities, and this will then lead to the creation of a society in which
everyone can find a sense of purpose in their life.
Based on the above perspectives, the following reforms will be promoted as an integrated
three-pronged approach.
1) Support for improving abilities through re-skilling
2) Introduction of job-based wages according to the actual conditions of individual companies
3) Facilitation of labor movement to growth fields
In conjunction with this, respect for diversity and correcting disparities will be prioritized,
and we will promote integrated efforts such as to raise the minimum wage, ensure propertransactions by passing on labor costs, enforce equal pay for equal work between regular andnon-regular workers, improve the environment the re-skilling of workers at SMEs and small
businesses, and enhance career education.
In doing so, because some of these reforms require time, the public and private sectors will
confirm their progress at regular intervals, and systemic reviews will be conducted while
sharing timelines.
In addition, because the response to these reforms is expected to greatly differ by industry
sector, fine-tuned responses will be made in cooperation with the ministries and agencies withjurisdiction over the business.
(4) Support for improving abilities through re-skilling(1) Expanding direct support for individuals
75% of the government's re-skilling support measures for currently employed workers aremainly via companies (77.1 billion yen (human resources development support subsidies,public vocational training (training for currently employed workers), and operational cost7

grants for the Human Resources Productivity Support Center)) and 25% is done via individuals(23.7 billion yen in educational training benefits). 3 In order to enable working individuals to
make their own choices, within five years and while verifying the effects, we will make itpossible for more than half of re-skilling benefits to be paid via individuals and increase theratio of currently employed workers who are taking re-skilling courses.
In doing so, and based on the experience in developed countries that re-skilling subjects canbe applied regardless of industry while still being effective for workers' medium- to long-term
career development 4, more emphasis will be placed on off-the-job-training, including training
courses run by private educational companies and degree programs run by universities, where
skills can be proven regardless of industry or company.
The use of digital certification and display systems ("open badges") will be encouraged asa way to help visualize the history of skills acquired by individuals, regardless of their industry
or company.
With regard to educational and training benefits for employment insurance, in fields 5 wherehigh wages can be obtained and fields where high employability is expected to improve (IT,data
analytics,
projectmanagement,
technical
research,sales/marketing,management/planning, and tourism/logistics, etc.), consideration will be given to expanding
the subsidy rate and subsidy upper limit when individuals enroll in re-skilling programs, aswell as to designing specific re-skilling systems.
In particular, with regard to the portion of re-skilling programs that will be enhanced thistime, Hello Work and education and training institutions, etc. will confirm in advance theappropriateness of their content for re-skilling so that workers (including currently employedworkers) can, while receiving consultations, appropriately select the content and method fortaking re-skilling programs according to their own know-how, skills, and intentions.
The role of career consultants will be strengthened, and, in the future, consideration will begiven to whether or not some career consultants in the private sector will also take on the roleof confirming the appropriateness of support measures.
Efforts will be made to utilize online systems to streamline the procedures for receiving
education and training benefits.
We will also review the content of support measures for re-skilling via companies, andconsider enhancing those for which it is necessary. In doing so, we will provide re-skilling
support for non-regular workers, etc., who have few opportunities for training withincompanies, by utilizing flexible dates and implementation methods that make it easy to learn
while working and that lead to career advancement according to the individual's wishes.
As part of efforts to achieve the new target of 500,000 Japanese students studying abroad
by 2033, we will encourage working adults to study at overseas graduate schools, which has
been sluggish in recent years. In doing so, we will take into consideration the fact that there
are time constraints for individuals who are currently working, and we will promote efforts foronline study abroad.
(2) The necessity of strengthening investment in Japanese companies' human resources
Japanese companies' investment in human resources (excluding on-the-job-training)remained at 0.1% of GDP from 2010 to 2014, which is a level that is lower than that ofdeveloped countries such as the U.S. (2.08%) and France (1.78%). And, in recent years, it has
been on a downward trend. As population decline intensifies labor supply constraints,
companies that do not invest in their people will find it increasingly difficult to attract talented
human resources, which will directly lead to a weakening of their corporate value andcompetitiveness.
On the other hand, the experiences of other countries shows that companies that fully invest

8

in their people do not see an increase in turnover, but rather they are able to attract talented
people because those people have the opportunity to nurture themselves.
For this reason, it is important to keep in mind that companies themselves need to strengthen
re-skilling support for working individuals.
(3) Follow-up and review of the "Investment in Human Capital" policy package
Based on these guidelines, we will follow up on the implementation status of the package
each fiscal year so that each of the package's support measures will be easier for workers touse, and the results will be reflected in the budget for the following fiscal year.
Together with this, we will measure and analyze the effects on post-re-skilling
improvements in the treatment of employees and internal and external promotions andappointments, and then use this information to improve measures.
(4) Review of employment adjustment subsidies
The current employment adjustment subsidy is a system that subsidizes the costs of
employment adjustments in the form of educational training, secondment, or absence fromwork (subsidizes 1/2 of the costs for large companies and 2/3 of the costs for SMEs and small
businesses. In the case of employment adjustments through educational trainings, an additional
1,200 yen per person per day is provided).
Although this program has played an important role as a measure to maintain employment
in the face of rapidly worsening economic conditions such as the Lehman’s collapse and the
COVID-19 pandemic, it has been pointed out that if the subsidy continues for a long period oftime, it may hinder the maintenance and improvement of workers' job skills and the smoothtransition of workers to growing fields.
Therefore, in order to strengthen re-skilling 6 of currently employed workers, we willconduct a review of the subsidy rate, etc. so that it will be easier for employers to choose
employment adjustment through educational and training rather than through absence fromwork. In the current system, the benefit period of educational training or absence from work
is up to 100 days in a one year period and up to 150 days in a three year period. For example,
if the employment adjustment exceeds 30 days, then, as a general rule, educational training
will be required, and in exceptional cases where employment adjustment is made after thatdate through absence from work, we will consider lowering the subsidy rate or otherwise
revising the subsidy.
(5) Expansion of courses in digital fields, etc.
The number of digital-related courses (179 courses (as of April of this year)) in professional
practice education and training benefits will be expanded to more than 300 courses by the endof FY2025 in order to strengthen re-skilling in digital fields. In doing so, we plan to enhancecourses related to fields that are expected to grow in the future, such as generative AI, and thatare in line with the current era.
(6) Flexibility in the mechanism for deducting re-skilling expenses in employment income
deductions
The mechanism for deducting re-skilling expenses in employment income deductions(special expenditure deductions) has been revised so that not only the employer, but also career
consultants, can provide proof that the re-skilling is related to job duties. Further flexibility inthe system will be considered while monitoring the utilization status of the new system.
(5) Introduction of job-based wages according to the actual conditions of individual9

companies(1) Introduction of job-based wages that suit the actual conditions of individual companies
Through structural wage increases via the introduction of job-based wages that match theactual conditions of individual companies, we will aim to reduce the wage disparity that exists
between Japanese and foreign companies despite the fact that they are doing the same job,
while taking into account the differences in economic conditions in each country.
Within the year and for the purpose of securing job-based wages for personnel at Japanesecompanies, we will develop case studies and present a variety of models to serve as references
for individual companies to refer to when introducing systems for the following: methods fororganizing and bundling jobs; personnel placement, training, and evaluation methods basedon these; posting systems; re-skilling methods; employee performance improvement plans(PIP); wage systems; current legislation and judicial precedents about changes in working
conditions; and leave systems, 7 etc. In doing so, because the actual conditions of individualcompanies differ, the reforms will have a degree of flexibility so that they can be adapted tothe actual conditions at companies. Examples of SMEs and small businesses will also be
introduced.
Additionally, when introducing job-based personnel (job-based wages), it is also possible
to introduce and apply them sequentially, considering not only skills, but also individual
performance and aptitudes.
Hereafter, several examples of introductions will be presented, but, in order to present morediverse models, a subcommittee composed primarily of private sector practitioners will, by theend of the year, compile a collection of case studies so that companies can concretely refer tothem.
(2) Ensuring transparency of salary and employment systems
We will continue to disclose information in order to make the concept and status of salaryand employment systems visible to the capital and labor markets.
In addition, the "Guidelines for Human Capital Visualization" (formulated in August 2022),
which are used as a reference when companies make descriptions in their annual securities
reports and integrated reports, etc., will be revised by the end of the year based on theseguidelines.
(3) Introduction of some examples
This section presents some examples of companies that are introducing job-based wages(job-based personnel).
ⅰ) Purpose of introducing job-based wages (job-based personnel)
 As overseas markets expand, in order to explore the needs of global society and customers
and to provide services and solutions that resolve these issues, we need (1) growthoriented human resource management for both the organization and individuals throughjob-based systems, (2) allocation and recruitment of human resources from both insideand outside the company using job descriptions, and (3) re-skilling using jobs (electronics
manufacturer H).
 As a means for us to change from an IT company to a DX company, we have to moveaway from a seniority-based personnel system and system to a job-based system thatallows us to assign the most appropriate personnel in order to realize an organizational
design based on business strategy (electronics manufacturer F).
 In order to establish a globally competitive organization, through a job-based system wehave to (1) appeal to outstanding external human resources, (2) shift to strengthening

10

expertise in human resources development, and (3) promote autonomous careerdevelopment through visualization of their career plan options (cosmetics manufacturerS).
ⅱ) Personnel placement, training, and evaluation methods
 Individual job descriptions are made available to all employees, and the appropriate
person is assigned to the job based on discussions on such as "Who amongst our currently
employees, candidates (both internal and external) and applicants should we assign?" and"What are the specific and objective reasons for placing them as the most suitable person?
By clarifying and publicizing the skills required for positions, (1) employees themselves
can become aware of gaps between their current situation and the necessary
skills/experience, (2) employees can formulate re-skilling plans in consultation with theirsupervisor to fill in these gaps, and (3) employees can engage in re-skilling of their own
initiative. In addition, by establishing a certificate system for jobs such as 'digital jobs,'
we foster an awareness amongst the employees themselves of continuous learning.
For managers we have shifted from a uniquely Japanese compensation system that is tiedto people (abilities) to a compensation system that is tied to jobs (duties) and that is sharedby the Group both domestically and overseas, and employees' treatment has been
determined by the content of their job and their performance (outcomes/behavior).
(electronics manufacturer H)
 After reviewing our seniority-based personnel system and mapping all employees by job
type and role, we are utilizing a posting system to optimally allocate human resources foreach job based on detailed job descriptions that were created for each individual position.
A system (1-on-1 meeting with supervisors and career coordinators) has been establishedso that employees can consult about their careers and re-skilling content. Additionally, there-skilling method has also been changed from a focus on uniform training for each rank
to instead focus on on-demand education, wherein the content can be selected according
to the employee's own characteristics and desired job.
We have reviewed the ability based compensation system, and for management positions
the compensation tied to the job has been reflected in their individual compensation as
well. For general employees we have set a more detailed salary range than before for eachjob responsibility based on a benchmark of compensation levels in the external labormarket so that evaluations based on the employee's contributions and behavior are easilyreflected in their compensation. (electronics manufacturer F)
 Instead of regular, company-initiated transfers across job categories, personnel transfers
are essentially made within the same job category with an emphasis on strengthening
expertise, and a posting system is used for transfers between job categories. Personnel
who wish to be part of the management team in the future are expected to volunteer for
postings and to gain experience in multiple positions.
After clarifying the skills and expertise required for each job (duties), through career
workshops for all managers and career-track employees, goal-setting and evaluation
processes, we have each employee formulate a medium- to long-term career plan and thenconduct re-skilling based on that plan. An employee's supervisor helps them to formulate
their career plan.
Individual goals corresponding to the outcomes and behavior expected of the job (duties)
are set in advance in consultation with the employee's superior, and then each employee's
evaluation is determined according to the degree of achievement and reflected in theirtreatment. (cosmetics manufacturer S)

11ⅲ) Posting system Via job descriptions, we clarify the content of duties required for positions that we arerecruiting for and the skills that are required for those duties, and then we havesimultaneous recruitment from both within the Group and via recruitment of experienced
hires. For in-house human resources, the skills, qualifications, experience, and career wishof personnel are visualized in advance and within the scope of individuals' consent, andthen matching is performed in light of the job description. (electronics manufacturer H)
 With a focus on transfers and promotions for executives through postings, and as a resultof significantly strengthening our posting system (such as by having all newly appointed
section manager positions being promoted via postings rather than via recommendations
by superiors, and by expanding the scope of postings to be global), in three years 25% of
our domestic employees applied for a posting. For employees who do not pass, we always
give them feedback on what points they were lacking in, and have them use it to develop
their own careers. (electronics manufacturer F) When vacancies become available, we recruit personnel through postings within thecompany as needed, and conduct personnel transfers based on the employee's own wishes,
including labor transfers between occupations within the company. (cosmetics
manufacturer S)ⅳ) Methods for introducing job-based wages (job-based personnel)
 When defining jobs (creating job descriptions), we referred to globally standardized job
definitions held by globally active external human resources consulting companies, andthen adjusted them for our company, which let us have a quick transition. (electronics
manufacturer H, electronics manufacturer F, cosmetics manufacturer S)ⅴ) Sequential introduction
 We introduced the system for managers from 2014. In 2020 we created job descriptions
for all jobs and at all levels, and then from July 2022 we introduced the system for all
employees. (electronics manufacturer H)
 We introduced the system for managers from 2020. From 2022 we introduced the generalsystem. (electronics manufacturer F) We introduced the system for managers from 2015. From 2021 we introduced the generalsystem. (cosmetics manufacturer S)ⅵ) Examples of performance and behavior appropriateness considerations
 We base our evaluations on performance and behavior appropriateness, such as 'Doingwhat is right for yourself and others without hesitation,' 'Moving fast and learn from failure
to succeed,' 'Empathize with customers and collaborate to create innovation,' 'Be
respectful, actively speak up, and listen to others' opinions,' 'Voraciously seek growth foryourself, for others, and for the organization.' (electronics manufacturer H)
 We expect roles to proactively promote research and development of innovativetechnologies to solve problems while also cooperating with teams and related departments
based on accurately grasping the latent needs and essential issues of society andcompanies. (electronics manufacturer F) Able to define/propose problems and take responsibility for implementing solutions", and"Absorbs a wide range of knowledge/experience, and has a desire to improve expertise asa professional. (cosmetics manufacturer S)(6) Facilitating the movement of labor to growth areas12(1) Revision of the unemployment benefits system
Looking at the unemployment benefit system from the perspective of facilitating labor
movement via an employee's choice, if a person leaves their job for personal reasons then theycannot receive unemployment benefits for two or three months after applying for a job, which
is different from the requirement for when the employee leaves their job at the discretion of
the company. We will make specific designs to relax the requirements for instances where an
individual leaves a job because of their own circumstances, such as treating cases where theapplicant has been engaged in re-skilling within, for example, one year from the time of
application for unemployment benefits as if it were a case of leaving their job at the discretionof the company.
(2) Review of retirement income tax system
With regard to the taxation of retirement income, the deduction per year of service isincreased from 400,000 yen to 700,000 yen after 20 years of service, and there has been an
opinion that this has hindered the facilitation of labor mobility at an individual's discretion.
We will review this tax system, paying attention to the impact of system changes.
With regard to iDeCo (individual-type Defined Contribution pension plan), which allows
individuals to contribute and manage their own contributions and to take their pension assets
with them when they change jobs, a conclusion regarding raising the contribution limits andthe upper limit of age eligibility to start receiving benefits will be reached in conjunction with
the next year’s Financial Verification of Public Pension Plan.
(3) Removing barriers to voluntary retirement
For private sectors as well, it may be necessary to review labor practices, such as reducing
retirement benefits in the case of voluntary retirement in some companies, and not paying
retirement allowances if the number of years of service and age is below a certain standard.
One of the reasons for this is pointed out that the "The Model Rules of Employment "established by the Ministry of Health, Labour, and Welfare stipulate restrictions on retirement
allowances based on number of years of service and that the treatment of voluntary retirees
differently from those of company retirees on retirement allowances, so we will amend theModel Rules of Employment will be revised.
(4) Sharing public-private information on recruitment, job-seeking, and career advancement
In Denmark, the government collects objective indicators such as wages and job openings
from the private sector and specifies the outlook for each occupation every six months in theform of green, yellow, and red. Danish caseworkers use this as a guide to help workers move
to better jobs. Workers also receive consultations from caseworkers when they are paid
subsidies such as unemployment benefits.
In Japan as well, in order to facilitate the smooth movement of labor to growth sectors, wewill establish a system to process, consolidate, and share basic information held by the public
and private sectors on job seeking and job offers, and career consultants (currently 66,000
people) will be able to provide consultations on career development and job changes toworkers based on this basic information.
Therefore,ⅰ) Job opening/job seeking information held by Hello Work will be processed andconsolidated,ⅱ) Of the job offer information that is held by private human resources companies, thenumber of job openings, wage trends (for recruitment), and the required skills for eachjob type and region will be anonymized and aggregated, and the method for doing so

13

will be considered at the Japan Association of Human Resource Services Industry, which
compiles pay rates for job changes and other information.
ⅲ) Information will be consolidated from private councils and Hello Work, etc., and basic
information will be provided to career consultants who meet certain requirements.
ⅳ) In the public sector, Hello Work will strengthen its consulting functions, such as bystrengthening the structure of its career consulting department, and will strive to enhancecontinuous consultation support from the time of employment.
These efforts will enable career consultants who work in the public and private sector andmeet certain requirements to provide advice and consultations based on objective data on jobchanges and career advancement to currently employed workers and job seekers who are
considering career advancement in each job category and region, similar to how it is done in
Denmark and other countries as part of flexicurity.
As for the public vocational training system, in addition to promoting greater efficiency for
operators of private education and training businesses by bringing applications online andutilizing employment data from Hello Work, we will promptly introduce a mechanism fordirectly hearing the opinions of on-site private education and training business operators.
Additionally, we will consider methods for supplementing and comparing wages before andafter changing jobs for occupations recommended by Hello Work. On top of this, we will
improve the operation of the system so that recommendations are made that take into accountthe possibility of wage increases before and after changing jobs, and the possibility of further
increases according to the individual's skill level.
In order for job seekers to consider SMEs and small businesses as one of their options, wewill consider how career consultants can effectively provide job seekers with qualitative
information about the strengths and attractiveness of individual SMEs and small businesses.
(5) Encouraging side jobs and multiple jobs
Side jobs and multiple jobs will be encouraged as a starting point for the smooth movementof labor to growth fields. To that end, a trial environment will be developed so that individual
workers can transition to new careers with peace of mind, such as support for companies that
accept people for side jobs/multiple jobs and for companies that send their own employees
out for side jobs/multiple jobs.
Additionally, we will use an industry employment stability subsidy and promote
enrollment-based company secondment will be promoted.
(6) Support for irregular workers
We will provide support such as advice and consultations for job applicants who are notcovered by employment insurance when transitioning to different work, including irregular
workers.
(7) Development of information infrastructure related to the Ministry of Health, Labour andWelfareWe will work to enhance the functionality and promote the use of the workplace information
website (Shokubalabo ("Workplace Lab")) operated by the Ministry of Health, Labour andWelfare. In addition, we will enhance the functionality of the Japanese version of O-NET (jobtag) and improve convenience for users with diverse attributes.
(7) Respecting diversity and correcting disparities(1) Minimum wage
Last year, the minimum wage was raised to a record high, and this year the Minimum Wage

14

Council (consisting of individuals representing the public, capital, and labor sectors) will be
asked to have thorough discussions, including on achieving a national weighted averageminimum wage of 1,000 yen per hour.
In addition, with regard to the regional disparity of the minimum wage, the number of ranks
that indicate the value of the minimum wage has been revised from four to three; in the future,
the aim is to correct regional disparity, such as by increasing the ratio of the minimum amountcompared to the maximum amount of the minimum wage by region.
After this summer, the policy for raising the minimum wage after reaching 1,000 yen perhour will also be discussed at the Council of New Form of Capitalism Realization.
(2) Improving the environment for wage increases at SMEs and small businesses, etc.
In order for SMEs and small businesses to raise wages, it is essential to support price passthrough measures and productivity improvements to realize a virtuous cycle of growth andwage increases, and through these efforts we will address the labor shortage in the region andhelp win the international competition to acquire human resources.
ⅰ) Promoting appropriate price pass-through measures and proper subcontracting transactions
To realize wage increases for SMEs and small businesses, we need to establish appropriate
price pass-through practices in supply chains as a whole, including securing sources of funds
for appropriate increases that do not lose out to rising prices. To accomplish this, we will focus
on even more measures against pass-through costs and optimize subcontracting transactions,
including carrying out special investigations of organizations that exceed 110,000 people
concerning the abuse of an advantageous position, and on-site investigations of five priority
industries. Industry groups must revise and ensure the completeness of autonomous actionplans. When it comes to pass-through labor costs in particular, the government, with thecooperation of the Japan Fair Trade Commission, carried out an investigation into the realityof each industry and, based on this, will summarize guidelines concerning pass-through laborcosts within the year.
ⅱ) Promoting productivity improvement support measures for SMEs and small businesses
In order to realize wage increases for SMEs and small businesses, we will credit against tax
for corporates raising wages and treat those preferentially in subsidies, etc., and work to further
strengthen support for improving productivity through manufacturing subsidies and businessrestructuring subsidies. In doing so, further measures, including tax credits, will be consideredafter sorting out the issues in order to promote wage increases even at corporations that arelosing money. In addition, with reference to the "Mikata" project that was conducted in theautomotive industry, we will implement reskilling for suppliers' human resources andhorizontally extend to other fields with integrated support through subsidies for these SMEs
and small businesses.
We will consider expanding support measures such as wage subsidies for when SMEs andsmall businesses send their employees for re-skilling, even if the re-skilling is voluntary byindividuals.
(3) Thorough implementation of an equal pay for equal work system
Even after the implementation of the equal pay for equal work system, which prohibits
unreasonable differences in the treatment between regular workers and non-regular workers
within the same company, there is still about 600 yen per hour gap between regular and nonregular workers.

15

Enforcement of the equal pay for equal work system is carried out by the 47 prefecturallabor bureaus throughout Japan. Nationwide there are 321 Labour Standard Inspection Offices,
but they do not have the authority to provide guidance and advice. In order to strengthen
enforcement of equal pay for equal work, Labor Standard Inspection Offices have also been
conducting trial investigations since December 2022, and are required to report problematiccompanies to the Labor Bureau.
Although it cannot be concluded that the wage gap of about 600 yen per hour is irrational,
we will follow up sequentially during the year to see the effect of the aforementioned surveys
by the Labour Standard Inspection Offices which was implemented in March 2023, on
correcting wage disparities, and after looking at the results, we will consider how to proceed.
In doing so, if necessary, we will consider strengthening the systems of related organizations.
Under the current guidelines, the equal pay for equal work system aims to improve thetreatment of non-regular workers by comparing regular workers and non-regular workers, but
this will be reconsidered by expanding the approach to employees with limited duties,
employees with limited work locations, and employees with limited hours. It should also be
noted once again that the equal pay for equal work system applies to all workers, including
foreign nationals.
(4) Follow-up on the mandatory disclosures in the Act on the Promotion of Women's Active
Engagement in Professional LifeWe will follow up on the state of gender wage gap after the enactment of mandatory
disclosures (enacted in July 2022 for employers with 301 or more workers) in order to obtain
direction on whether or not to expand the scope of mandatory disclosures (for employers with
101 to 300 workers) under the Act on the Promotion of Women's Active Engagement inProfessional Life.
(5) Enhancing career education
To enhance career education during the Period for Integrated Studies in elementary, juniorhigh, and high schools, we will disseminate implementation methods and good practices. In
addition, efforts will be made to enhance entrepreneurship education, including throughextracurricular activities by these schools.
Universities will also expand their curriculum to enhance career education.
In order to enhance human resource development and career awareness at universities andcolleges of technology (KOSEN), etc., we will actively recruit individuals who have practicalexperience at companies, etc., and significantly increase the number of practitioner-teachersthat are invited from companies, etc. Entrepreneurs from startups, SMEs, and small businesses
will also be invited as lecturers.
In addition, by promoting education and research that are integrated with corporate activities
at universities and colleges of technology (KOSEN), etc., we will advance both the social
implementation of research and the development of the advanced human resources that arenecessary to compete in the world.
We will strengthen support for efforts by companies to establish courses to develop humanresources in cooperation with universities or other higher education institutions.
(6) Promoting coexistence with foreign national workers
We will consider establishing a new system aimed at securing and developing humanresources by implementing the constructive dissolution of the current Technical Intern
Training Program in accordance with the actual situation.

16

In addition, we will also improve the educational environment for the children of foreign
nationals.
(8) Reforming the system for training and evaluating national public employees
In order to promote corporate labor market reform, with the spirit of "taking the first step,"
it is necessary for the government to update the system for training and evaluating national
public employees and to spread these trends to local public employees and incorporated
administrative agencies, etc.
Career paths and required skills also need to be reconsidered to fit the times. With theincreasing complexity of social issues and the sophistication of technology, national public
employees are increasingly being required to have high-level skills and expertise. Efforts
should be made to support employees’ career development, such as providing opportunities toraise awareness of their career paths based on such expertise, and sorting out their abilities thatnational public employees acquire as they build their careers by planning systems and gaining
certain experiences in the field.
In an environment where high-level skills and expertise are required, it is meaninglessunless each individual national public employee takes action to improve their skills
accordingly. As the current training programs are consisted primarily of classroom lectures, it
should be updated, for example, by increasing the number of participatory training programs,
and appropriately managing national public employees’ training attendance so that national
public employees receive the trainings that are required for their job responsibilities.
Moreover, from the perspective of full-fledged public-private exchanges, we will promoteconsideration of how to utilize public-private human resources.
We will also consider how best to manage national public employees' job histories, the skills
and expertise that they have acquired, the results achieved, and their experience.
(9) Matters relevant to the Guidelines for Integrated Three-Pronged Labor Market
Reforms
1) Ensuring fair transactions involving freelance contractors
Based on the Act on ensuring fair transactions involving freelance contractors, businesses
that entrust work to freelancers must ensure thorough compliance regarding the obligation ofissuance in writing or by email and prohibited acts during transactions, such as reducing
remuneration; to ensure this, we will strengthen the enforcement system and expand theconsultation system for freelancers.
In addition, to ensure the completeness of the mechanisms that take up issues fromindividual freelancers and organizations associated with freelancers, we will discuss aframework for opinion exchange. Based on the information obtained from these initiatives, wewill strive to gain an understanding of the current state of affairs, including carrying out aconcentrated fact-finding survey into industries in which there are many problem cases.
Moreover, we will discuss the establishment of a framework for ministries with authority
over industries to collaborate with the Japan Fair Trade Commission and the Small andMedium Enterprise Agency and encourage organizations of businesses that entrust work to
freelancers to ensure fair transactions involving freelance contractors.
2) Developing an environment in which men and women can easily work
We will focus on increasing the minimum wage and expanding the application of employee
insurance for short-term workers so they can work without being conscious of the so-called
1.06 million yen/1.3 million yen barrier. This year, we will also determine and implement
immediate steps so that employees that have broken through the 1.06 million yen wall do not
face a reversal of their take-home payments, and work on reviewing the system.

173) Decreasing the burden of higher education expenses
With regard to reductions/exemptions of class fees and paid scholarships, we aim to increase
the percentage of high school students from low-income households moving on to higher
education and from next fiscal year expand this to the middle class (around 6 million yen
household income per year), including students from households with multiple children or
those in science, technology, and agriculture; we will also consider further support for
reductions/exemptions of class fees for students from households with multiple children basedon the implementation situation and resources, etc. (widen the range of eligible annual income,increase the percentage of support based on annual income category, etc.), and take necessary measures.
In terms of the system in which people defer payment of class fees, we will further consider
introducing this in full after it is introduced for students at master’s level from next fiscal year
(note).

Note: The annual income level at which income-based payment begins will be around 3 million yen, but
income-based payment will not start before an annual income of 4 million yen if there are twochildren, for example, in consideration of payments during the childrearing period.

Ⅳ. Investment in GX and DX, etc.
1. Japan’s advantage in resilience and promotion of domestic business locations,attracting highly-skilled international professionals(1) Approaches to promoting domestic industry locations and strategic fields
As the opposition between authoritarian nations with state capitalism and liberal, democraticnations becomes more serious, advanced countries, especially in Europe and America, arestrengthening movements to shift global supply chains to their own country, neighboring
countries, and like-minded countries, in light of the geopolitical risks.
Additionally, the government is providing large-scale, long-term, comprehensive support
for strategic fields in which medium- and long-term growth in GX and DX is expected, thus
strengthening the movement to attract investment and private companies to locations in Japan.
In this context, uncertainty is currently increasing across the world against the backdrop of
the corona crisis and the invasion of Ukraine; Japan is relatively stable in terms of policy andeconomic climate, and with changes to the site environment of Japan in terms of costs, theappeal of our country as an investment destination is increasing.
It is important that we take this chance as a nation and both public and private sectors makebold investments in facilities and human resources.
On the other hand, when it comes to strategic fields in different countries, comprehensive
support is either already going ahead or is expected, including running costs that go beyond
initial investment over 5–10 years. In the U.S., budgetary and tax reduction measures havebeen put in place via the framework of the Inflation Reduction Act. Some European companies
are considering business in America based on this, so the EU opposes it, and has announced
that within the EU area revisions will be made to relax the state aid rules in terms of investment
in GX fields.
It is also necessary for Japan to implement comprehensive support focused on strategic
fields in which growth is expected on a scale and for a period of time that will enable it todemonstrate medium- and long-term predictability to companies within Japan and overseas.
Increased domestic investment, especially in regional areas, will increase quality
employment and raise hopes for marriage and child-rearing among the younger generation,
contributing to measures for the falling birth rate. In fact, investment in semiconductors by the18

public and private sectors in Kyushu and the Chubu region has led to a virtuous cycle ofincreased investment and more quality employment.
On the other hand, investment focused on strategic fields such as semiconductors, batteries,
biomanufacturing, and data centers requires planning for large domestic sites and investment,
and business running costs are huge. Consequently, it is important to ensure adequate
predictability in the medium and long term for private enterprises.
Based on the abovementioned points, we will consider support in terms of the tax systemand the budget with standards of an international level.
(2) Measures for strategic fields (Semiconductors, batteries, biomanufacturing, data
centers, etc.)
1) Semiconductors
With regard to semiconductors, it is possible to process and calculate advanced/highspeed/power-saving data by ensuring high efficiency performance and reduced power
consumption; this increases productivity and has a significant effect on everyday life in society.
As an increase of data processing in terms of the use of automobiles and industrial robots iscertain, we expect to secure stable supply chains and promote domestic investment, including
in related industries, from the perspective of GX and DX.
Global semiconductor manufacturers are demonstrating a desire for active capital
investment in anticipation of explosive demand growth in the future, and there has been an
increase in competition over attracting semiconductor-related industries to countries aroundthe world.
In Japan, when we attracted a leading-edge semiconductor manufacturer TSMC (Taiwan
Semiconductor Manufacturing Company) to Kumamoto Prefecture, there were signs of a virtuous
cycle of increased investment and more quality employment, including increased investment
in related industries, collaboration to train human resources, and an increase in wages in the
Kyushu area; it is important that we should engage in horizontal development of this bestpractice. The expansion of manufacturing infrastructure for advanced and industrial
semiconductors, manufacturing equipment, component materials, and raw materials will bepromoted, as will human resource development.
We will also establish a cooperative framework between Japan, European countries, andUnited States at government level for next-generation semiconductors, aiming to attract top
talents from Japan and other countries with the companies and research organizations at theheart of production serving as hubs of international collaboration, as well as establishingdesign and manufacturing infrastructure to make next-generation semiconductors usefulduring the 2020s through collaboration with like-minded countries, and support for R&D andmass production. On top of this, we will promote the development of future technology suchas photoelectric fusion, with an eye to realizing this in the 2030s and beyond.
2) Batteries
Batteries are essential for the progression of GX, including making mobility electric andexpanding the introduction of renewable energy; a movement is going ahead in countries
around the world to secure whole supply chains, from upstream resources to downstream
manufacturing infrastructure. In this context, it is vital that Japan occupies the heart of theworld’s global battery supply chain.
The lithium-ion battery, currently mainstream, is technology that was developed and put touse for the first time in the world by Japan, so to maintain and increase Japan’s predominance,
we will further expand manufacturing infrastructure for batteries, materials, andmanufacturing equipment.

19

On the other hand, the supply-demand of battery metals is expected to become tight around2030, so it is an urgent task to secure stable supply of upstream resources. We are building asystem of public-private collaboration and expanding the functions of the Japan Organization
for Metals and Energy Security so that trading companies and downstream companies cansecure their interests and a stable supply of battery metals.
After strengthening collaboration with Canada and Australia, which have upstream
resources, and with the U.S., which has a huge market, we will promote strategic collaboration
with like-minded countries and overseas expansion to create a resilient global supply chainthat includes countries and regions that possess resources, so-called "global south."Moreover, as the global competition over the development of next-generation batteries heats
up, Japan aims for new innovation in the battery field through technical development andverification with an eye to the mass production of next-generation batteries, including allsolid-state batteries whose development Japan is leading and human resources development,
etc.
3) Biomanufacturing
Biomanufacturing is a growth area that contributes to solving social issues such as global
warming by using gene technology to alter the quality and quantity of products synthesized by
microbes.
We will promote the development and verification of large-scale technology with microbial
design platform operators as the starting point, as well as initiatives for large-scale production
and social implementation, including the creation of initial demand for bio-based products andthe establishment of certification labelling systems for promoting consumer’s acceptance.
In addition, in the biological fields in which Japan has global competitiveness, we will
accelerate the development and expansion of incubation hubs through collaboration withprivate companies, aimed at regions in which cutting-edge academia and start-ups areconcentrated, and support startups that want to expand abroad to enter the U.S. and othercountries to build up local ecosystems and networks.
4) Data centers
Data centers are vital to augment servers suitable for AI, as the use of AI, especiallygenerative AI, rapidly increases around the globe. In addition, in light of the tremendous
increase of information processing, we will strengthen resilience by correcting the heavy
concentration in the Tokyo area, and gradually facilitate decentralized locations from theperspective of using decarbonized power sources.
Furthermore, we will ensure interconnection, supporting the development of domestic
submarine cables from the perspective of using computing resources both efficiently andeffectively, and completing a cable that encircles Japan. We will also quickly promote multiple
routes for international submarine cables with the cooperation of like-minded countries, toenable Japan to become a hub for international data distribution.
(3) Cross-sectional environmental development
1) Developing an innovation environment and infrastructureInternational competition is progressing in terms of innovation, which is a source of profit,and from the perspective of supporting private investment in intangible assets, we aim todevelop an innovation environment, including considering a tax system to encourage
investment in R&D for the creation of intellectual assets equal to or above those of othercountries, and investing in infrastructure that will create added value for the next generation,for example communication and computing infrastructure.

20

In addition, we will promote the development of industrial infrastructure associated with
key industries, such as industrial water and industrial land provided through the facilitation ofland use adjustment, in order to utilize land and solve infrastructure constraints for corporatesites. We will also develop sites for industry by facilitating adjustments for land use. We willencourage more efficient and more resilient supply chains by digitalizing trade procedures.
2) Ensuring stable supply chains
We will consider responses to problems that are identified in the supply chains of criticalproducts such as semiconductors and batteries by conducting continuous inspections andevaluations, and make absolutely sure that the supply chains are maintained. We will also
support the establishment of domestic production bases for supply chains as a whole, including
the return of components made overseas to Japan.
To develop advanced key technologies, we will demonstrate technology that should be thesubject of new support, and realize continuing and strong support by steadily engaging in R&D
with accompaniment and support from the public and private sectors. We will further consider
forms of support, including capital reinforcement for private companies that take on the
responsibility of manufacturing critical products for survival of citizens, their daily lives, andeconomic activities.
Furthermore, based on the fact that businesses that do not demonstrate their strict
information management when handling sensitive information find it difficult to engage in
information exchanges and transactions with foreign governments and businesses, we willthoroughly consider and come to a conclusion concerning a legislative system, etc. to reinforce
Japan’s information security, including confirming the eligibility (security clearance) of people
handling government’s sensitive information, in light of principal countries’ information
security systems and industrial needs.
(4) Attracting highly-skilled international professionals
As the globalization of the economy and digitalization advance, demand for high-levelglobal talents is increasing around the world, and competition between different countries toobtain them is intensifying.
Meanwhile, in Japan, the percentage of global professionals born overseas is less than 1%;
this is very low in comparison to the UK (23%), the U.S. (16%), and Germany (13%). A surveyof foreign companies and foreign employees in Japan indicated that in addition to the language
barrier, the cause is difficulty in using everyday life infrastructure, including administrative
procedures, and tax rates.
In light of these issues, we will promote further acceptance of global talents by leveraging
our advantage in resilience.
In April this year, we created a new eligibility system for residence, aimed at the top levelof highly-skilled professionals and young people with high potential who have graduated from
top-level universities around the world.
Additionally, for expanding the acceptance of highly skilled foreign professionals, we willassess and examine issues, including taxation, regulations, and other institutional aspects, andtake necessary measures.
2. GX and energy security
The human race is now facing a shared challenge of global climate change such as extreme
weather and a rising number of massive natural disasters all over the world. As more countries
and regions announce their net-zero targets and the global momentum for decarbonization
grows, Japan has also made international commitments to reducing greenhouse gas emissions

21

by 46% in FY2030 and achieving net zero greenhouse gas emissions by 2050, announcing ourstrong determination to address the climate change as a nation.
Meanwhile, Russia’s military invasion of Ukraine in February 2022 has dramaticallychanged the world’s energy situation; and the current crisis has revealed the vulnerabilities ofJapan’s energy supply systems and their issues with regard to national energy security.
For Japan, a country that has experienced many critical moments in history with stableenergy supply being disrupted, the idea of Green Transformation, or GX, means a thoroughoverhaul of its post-war industrial/energy policies, as GX will transform our entire industrial
and social structures centering around fossil energy sources, long established since theIndustrial Revolution, into ones based on clean energy.
As a country surrounded by sea and deprived of natural resources that can be extracted
easily, Japan has traditionally focused on research and development in the field of
decarbonization technologies, with Japanese corporations having technological strengths inmany areas. Making the most of these technological advantages to accelerate GX will lead tothe stable supply of energy as well as providing opportunities for putting Japan on track for adramatic bounce-back to economic growth. In addition to contributing to achieve net zero incountries around the world, we need to achieve the economic growth through creating new
demand and markets in the decarbonization area, and re-strengthening Japan’s industrial
competitiveness.
Based on the Basic Policy for the Realization GX (Green Transformation) decided by the
Cabinet, we will promote initiatives to simultaneously achieve stable energy supply, stronger
industrial competitiveness, economic growth, and decarbonization, through the realization of
GX.
(1) Decarbonization initiatives towards GX based on the premise of ensuring a stableenergy supply
1) Promoting thorough energy efficiency improvement, restructuring the manufacturingindustry (fuels and feedstocks transition)ⅰ) Promoting Energy Efficiency Improvement
In residential, commercial, industrial, and transport sectors, we will promote bold energy
efficiency improvement through a combination of regulatory measures and support measures
based on "the Act on the Rationalizing Energy Use and Shifting to Non-fossil Energy”.
For companies, we will strengthen the support measures for SMEs by subsidies which are
eligible for multiple-year investment plans. We will also strengthen the support measures bysubsidies for energy efficiency diagnosis.
For households, related ministries and agencies will work together to strengthen the support
measures, including new construction and renovation of energy-efficient homes andimproving window insulation, through a one-stop service using a unified window.
ⅱ) Fuels and feedstocks transition
Based on "the Act on the Rationalizing Energy Use and Shifting to Non-fossil Energy”,
large consumers are obliged to submit medium- to long-term plans and periodic reports on
the shift to non-fossil energy. We will encourage the shift with newly proposed guidelines
for the five major industries that account for 40% of energy consumption in the industrial
sector (steel, chemical, cement, paper, and automobile manufacturing industries). In addition,by introducing a new system of voluntary disclosure of the periodic report information underthe Act, we will encourage the disclosure of information about energy efficiency
improvement and shift to non-fossil energy.

22

On top of this, we will provide concentrated support for developing and introducing
innovative technology such as hydrogen-reduced steel manufacturing, shifting to a production
system that moves from blast furnaces to electric furnaces, shifting to a carbon-recycling
production system that uses ammonia-fueled naphtha crackers, and changing fuels in coalprivate power generation.
ⅲ) Decarbonization of heat demand, demand response
We will promote the spread of energy-efficient appliance, such as heat pump water heaters
and fuel cells for residential use, as well as encouraging the introduction of energy-efficientequipment such as industrial heat pumps and cogeneration for industry, aiming for
decarbonization of heat demand and the effective use of heat.
Demand response will be further expanded.
2) Making renewable energy as a main source of powerⅰ) Wider introduction of renewable energy
To widen the introduction of renewable energy, a key decarbonized power source, while
managing excessive national burden and ensuring harmony with local communities, based on
the concept of S+3E (safety, energy security, economic efficiency, environment), we work to
maximize wider introduction of renewable energy as a major power source, by approaching
renewable energy on the top priority, and will collaborate closely with relevant ministries,
agencies and organizations as we aim to reliably reach a renewable energy ratio of 36–38% ofelectrical power in FY2030.
To accomplish this, as an immediate initiative, relevant ministries, agencies andorganizations will come together to maximize the introduction of solar power generation insuitable locations, by promoting the expansion of solar panel equipment for shared public
facilities, homes, factories, warehouses, airports, and railways, and introducing region-led
renewable energy, making use of the Act on Promotion of Global Warming Countermeasures.
For FIT (Feed in Tariff)/FIP (Feed in Premium) systems, we will encourage the use of a bidding
system to reduce power generation costs, as well as widening the introduction of FIP systems.
Moreover, we will expand models to introduce solar power through long-term contracts withcustomers that do not rely on FIT/FIP systems.
ⅱ) Wider introduction of offshore wind power
To widen the introduction of offshore wind power, we will select businesses during thisfiscal year based on a review of the rules for public applications, including incentivizing theappraisal of plans to start operations in the early stages. We will also accelerate the formationof proposals through Japan version of a centralized model. On top of this, we will consider
systematic measures to expand to the exclusive economic zone (EEZ).
ⅲ) System development, responding to output fluctuations
In terms of concrete measures for system development, we will carry out cost-benefit
analysis based on a national system development plan (master plan), obtaining an understandingof local areas and considering the utilization of infrastructure such as roads and rail networks
as we promote the development of a national system and the development of submarine direct
current transmission. For systems that connect regions, we will work to accelerate
development over the next 10 years or so on a scale eight times more (at least 10 million kW)
than the past 10 years (around 1.2 million kW), and promote development aiming forsubmarine direct transmission from Hokkaido in FY2030.

23

To ensure balancing capacity, we will formulate the prospects of introducing stationary
batteries in 2030, and attract investment from private companies. To reduce the costs ofstationary batteries and make these commercial quickly, we will promote support for theirintroduction, at the same time, establish a market which distributed energy resources can enter,
including batteries for homes, and develop rules that can easily connect batteries to systems.
ⅳ) Next-generation solar cells and floating offshore wind power
We are promoting the establishment of mass production technology, the creation of demand,and the development of a production system, supporting R&D and introductions for the rapidsocial implementation of next-generation solar cells (perovskite) and accelerating theirverification in collaboration with users.
We have set goals for the introduction of floating offshore wind power, and to achieve these
we will carry out technological development and large-scale verification, as well as promote
the formation of large-scale and resilient supply chains in industries connected to offshore
wind power, including windmills, relevant components, and floating bases. We will also work
to develop human resources who will be responsible for the renewable energy industry in local
areas through government-industry-academia collaboration, including colleges of technology(KOSEN).
We will steadily operate the cost-saving system for the disposal of solar panels that started
in July last year, and will implement planned measures to ensure we can properly cope withthe peak of mass disposal expected in the 2030s.
3) Utilization of nuclear powerⅰ) Utilization of nuclear power and the restart on the major premise of securing safety
The fundamental premise for utilizing nuclear power is that the national government andoperators never forget the lessons learned from the accident at Tokyo Electric Power
Company’s Fukushima Dai-ichi Nuclear Power Station, continuously asking whether they are
free of safety myths. The national government will lead efforts to make self-motivated safety
improvements beyond satisfying regulation, reform management and organization of utilities,
coexist with host communities through supporting for municipalities and continuous
improvement of disaster mitigation and control methods including construction andmaintenance of evacuation routes based on unique local situations as well as deepening andextending communication with different groups of Japan’s population.
On that premise, nuclear power, which is characterized as a carbon free energy source andhaving stable output and high autonomy, will be utilized to achieve both the stable energy
supply and net zero emissions. In order to make sure to achieve the target of approximately
20-22% nuclear power of the total power generation mix in 2030 defined by the Strategic
Energy Plan, giving top priority to safety, we will facilitate the restart of the nuclear reactorsthat have passed safety reviews by the Nuclear Regulation Authority and have gained local
understanding.
ⅱ）Development and construction of next-generation advanced reactors and utilization ofexisting nuclear power plants
Nuclear power will be utilized in line with the Strategic Energy Plan by aiming to improve
nuclear safety through the development and construction of next-generation advanced reactors
with built-in new safety mechanisms. On the basic premise of gaining local understanding,plans for building next-generation advanced reactors within the sites of existing nuclear power
plants that have determined to be decommissioned will be materialized, taking developments
in back-end such as the completion of Rokkasho Reprocessing Plant into account. Other

24

development and construction projects will be considered based on the future situation,
including the status of reactors operating in each region and how local understanding has
progressed. Additionally, the business environment required for safety improvement and otherinitiatives will be developed, while offering stronger support for research and development,
training, and supply chain maintenance and enhancement. Steps will also be taken to promoteresearch and development through international collaborations with partner countries, to builda resilient supply chain, and to ensure nuclear safety and security.
In order to utilize existing nuclear power plants maximally, the operation period, limited to
40 years with a possibility of extensions for 20 years in the same way as current regulations,will be approved to be additionally extended for a certain length of outage periods on thepremise of the Nuclear Regulation Authority conducting rigorous safety reviews.
ⅲ) Promoting the nuclear fuel cycle, steady and efficient decommissioning, realizing final
disposal
We will promote the development of a framework that promotes the nuclear fuel cycle,
including achieving the completion of construction goals of the Rokkasho reprocessing plant,
sharing knowledge to ensure the steady and efficient decommissioning of reactors, andsecuring funds; to encourage country-led understanding by citizens to realize final disposal
and drastically strengthen proactive work for local municipalities, we will also promotemeasures to create a support system as a nation for municipalities to accept literature survey,
to strengthen the system of the implementing entity, the Nuclear Waste Management
Organization of Japan (NUMO), to establish a conference for discussion between the national
government and the relevant municipalities, and to suggest from various levels of thegovernment to local stakeholders.
4) Encouraging the introduction of hydrogen and ammoniaⅰ) Constructing large-scale and resilient supply chains
Based on the national strategy, we must move to clean hydrogen and ammonia, and will
work to develop a comprehensive system for both regulation and support, including support
focused on the price differences to existing fuels and support to develop bases to encourageincreased demand and industry clusters; as we develop hydrogen core technology in Japan andoverseas, we aim to quickly create resilient supply chains.
ⅱ) Creating domestic production and supply systems
From the perspective of energy security, we will also support the creation of domestichydrogen and ammonia production and supply systems. Realizing domestic production andsupply of large-scale green hydrogen in particular as fast as possible, with a view to themedium and long term, will involve accelerating R&D and support for the introduction of bothhydrogen production and utilization from surplus renewable energy.
5) Developing electric and gas markets to realize net zero greenhouse gas emissions
To secure a stable supply capacity, we will steadily run a capacity market, to be launchednext fiscal year, as well as support the realization of a stable supply through Reserve Power
Plants with a view to utilizing the inactive power plants in emergencies, and through LongTerm Decarbonized Power Resource Auction; we will also support systematic investment indecarbonized electric power.
Moreover, we will create a flexible framework for raw materials between electric powerand gas companies.

256) Strengthening national contributions, including resource diplomacy to secure resourcesⅰ) Securing a stable supply of resources
In light of the increasingly uncertain LNG market trends, and given the nature of LNG,
which is difficult to reserve for the long term, all possible policy measures will be mobilized
to ensure stable LNG supplies, including the establishment of strategic buffer LNG byleveraging the private sector’s procurement capabilities.
In view of the importance of international projects such as Sakhalin 1 and 2 and Arctic
LNG2 to energy security, we will maintain our current interests. We will continue tocollaborate with international society, including the G7, with the public and private sectors
coming together to strive to secure stable supplies.
ⅱ) Securing domestically produced resources
From the perspective of a securing stable domestically produced resources that are notaffected by geopolitical risks, we will support technological development concerning
resources that can be developed in Japan, as well as submarine hydrothermal deposits, so we
can continuously obtain results as early as possible, especially for methane hydrate.
7) Other initiatives in individual fields
When it comes to initiatives in other individual fields, we will steadily promote concrete
initiatives in fields such as next-generation automobiles, carbon-neutral fuels (domestically
produced sustainable aviation fuel (SAF), e-fuel, e-methane, etc.), and CCS (Carbon dioxide Capture andStorage), based on the Basic Policy for the Realization of GX (Green Transformation).
(2) Realizing and implementing Pro-Growth Carbon Pricing Concept1) Support for bold initial investment leveraging GX Economy Transition Bonds (Government
support integrated with regulation for GX investment)
In order to invest more than ¥150 trillion in GX for 10 years through public-private
partnerships, the government must offer long-term multi-year support programs to provide
predictability for private businesses. To this end, new GX Economy Transition Bonds program
will be launched. These bonds can be leveraged to offer bold support for advance investment
amounting to ¥20 trillion. This program for promoting investment will be implemented
together with regulatory and structural initiatives to have a positive impact on the creation of
new markets and demands. In doing so, the coverage will be investments where it is genuinely
difficult for the private sector alone to make investment decisions, in sectors that will
simultaneously contribute to realizing stronger industrial competitiveness, economic growthand emissions reductions alike.
2) Upfront incentives for GX investment through carbon pricing
Carbon pricing will enhance the added value of GX-related products and businesses as aresult of assigning prices to carbon emissions. On the other hand, taking into account the
impact its implementation may have on our economy, it will be introduced following theestablishment of a period for intensive engagement in GX, rather than being introduced
promptly. Additionally, by initially introducing carbon pricing at a low burden, graduallylifting it, and then once again presenting the policy, companies will be encouraged to bring
GX investment forward. Furthermore, the basis will be to introduce carbon pricing while
reducing the total cost of the energy-related burden in the medium to long term.
i) Full launch of the “emissions trading system”

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Following the full launch of the “emissions trading system (ETS)” from FY2026, in orderto further enhance the fairness and effectiveness associated with the system while placingemphasis on the autonomy of participating companies, the government will explore measures
for further lifting the participation rate, private-sector third-party certification of reduction
targets based on government guidelines, and regulatory tightening for achieving targets (suchas guidance/supervision and obligatory compliance), along with moving to examine further
developments based on the progress of the “emissions trading system (ETS),” international
trends, etc.
ii) Phased introduction of “paid auctions” for power operators
The government will implement the phased introduction of “paid auctions” for power
operators that are large emitters (the electricity generation utility prescribed in Item 15,
Paragraph 1, Article 2 of the Electricity Business Act) from FY2033.
ⅲ) Introduction of “fossil fuel surcharge”
In order to ensure that motivation for GX is broad and is not limited to large emitters, “fossil
fuel surcharge” will be introduced from FY2028 as across-the-board carbon pricing for carbon
emissions, following the establishment of a five-year period for intensive engagement in GX.
ⅳ) Establishment of the “GX Promotion Organization” to oversee the implementation ofcarbon pricing, etc.
The “GX Promotion Organization” will be set up as the organization that will run theemissions trading system, and implement duties related to the collection of expenses and levies(including some upfront investment support).
3) Utilization of new financial approaches
In order to encourage proactive financing by the private sector toward realizing publicprivate GX investment of more than 150 trillion yen, in addition to expanding green finance,
we will strengthen initiatives for fostering international understanding for transition finance.
Additionally, in the interests of establishing financial approaches that combine public funds
and private capital (blended finance), the “GX Promotion Organization” will implement risk
compensation measures (including loan guarantees) for risks that private financial institutions
cannot manage fully (such as immense sums or longer terms than in conventional finance andinvesting).
Furthermore, the Organization will engage in developing the environment for promoting
sustainable finance overall.
4) Addressing challenges in multi-enterprise collaborations
Since collaborations by multiple enterprises will be important to implementing GX, whenit comes to the challenges the enterprises face in relation to the Antimonopoly Act in areas
such as the joint disposal of facilities, joint procurement of raw materials and fuels, and datasharing, responses that support efforts by enterprises, etc. will be considered, based also on theinternational competitive situation.
(3) Strategies for international expansion
In Asia, the developments of clean energy projects, including those of renewable energy,
will be accelerated toward achieving the Asia Zero Emission Community (AZEC) initiative.
As part of this effort, we will move ahead with supporting the formulation of a road map
toward achieving net zero, supporting the financing of transition technologies and projects,

27and human capacity development in the field of decarbonization technologies, through the
Asia Energy Transition Initiative (AETI). Furthermore, we will also work for further
expansion of the number of Joint Crediting Mechanism (JCM) partner countries.
(4) Promoting GX throughout society
1) Fair transition
We will encourage a fair transition through support for facilitating the labor mobility to
growth areas, and support for job changes for advancing the careers of those currently
employed.
2) Promoting GX of SMEs, startups, etc.
In addition to promoting support for the visualization of emissions so that SMEs too cancalculate their emissions easily, and promote assistance with reducing emissions throughsupport for capital investment that promotes energy conservation and CO2 mitigation, we will
provide support for human resources development etc. at support agencies in order to constructa framework in which the efforts of SMEs etc. are supported in a push-type manner byorganizations such as SME support agencies and regional financial institutions.
Additionally, the decarbonization of the entire supply chain including SMEs will bepromoted by further expansion of the “Declaration of Partnership Building”
Furthermore, we will drastically strengthen support research and development and social
implementation etc. at startups in GX-related fields.
(5) Efficient and circular use of resources
Based also on the economic security perspective of securing scarce resources and rare earth,
the government will promote collaboration between “arterial industries” and “venous
industries,” as well as research and development and capital investment etc. by companies, inorder to advance, through industry-government-academia collaboration, a shift to a circular
economy that effectively utilizes resources efficiently and circularly across the entire market
life cycle.
3. Food security
The risks to food security are increasing. Amid the intensifying competition for food that isaccompanying global population growth and the destabilization of food production arisingfrom climate change etc., as well as the “weaponization” of food and the growing frequency
and severity of disasters, it has become evident that circumstances conducive to importingfood at low prices at all times cannot be counted on to continue. Additionally, with 20 years
having passed since the enactment of the Food, Agriculture and Rural Areas Basic Act, thesocial situation and future forecasts on which it is premised are changing significantly.
In light of this environmental change, we will move ahead with embodying measures basedon the “New Direction of Food, Agricultural and Rural Policy,” toward establishing a robust
and sustainable food supply base, and will also accelerate work on revising the Food,
Agriculture and Rural Areas Basic Act with the goal of submitting a draft amendment of thelegislation to the Diet during the current fiscal year.
(1) Establishing food security
1) The concept of food security
The Food and Agriculture Organization of the United Nations defines food security as not
only ensuring the necessary food for a country as a whole, but also to distribute that food toeach and every citizen. Taking this international definition into consideration also, food28

security will be reorganized as something that includes ensuring each and every citizen canaccess food and can enjoy a healthy eating not only in unforeseen circumstances, but also innormal times.
2) Strengthening stable supplies of food toward mitigating import risks
We will advance structural reform measures toward ensuring stable food supplies, on thebasis of appropriately combining stable imports and stockpiles, while boosting domestic
production in order to reduce reliance on imports. Those measures will include promoting thetransformation of paddy fields into farmland or general-purpose land while expanding
production of such products in response to demand as wheat, soybeans, vegetables forprocessing and business use, and forage crops, and encouraging greater use of rice flour and amove toward the domestic production of fertilizer.
3) Building a sustainable food system toward appropriate price-formation
In order to make the entire food system sustainable, a venue where stakeholders at eachstage, from production through to processing, distribution and sale, can hold discussions willbe established, and a framework for appropriate price formation for food will be established.
Additionally, in order to work toward the sustainable development of food production,
which is an important constituent of the food system, we will built frameworks that make iteasy for production areas and the food industry to work together to pursue the cultivation of
production areas, stable procurement, etc., and frameworks for promoting initiatives that takesustainability by the food industry into account, such as environmental impact reduction andprocuring raw materials while paying attention to human rights.
4) Improving food access so that all citizens can lead healthy dietary habits
In order to ensure uninterrupted food access, the relevant ministries and government
agencies will coordinate on promoting initiatives such as responding to the so-called 2024
problem in the logistics industry, implementing measures for people who have difficulty
accessing grocery stores, and encouraging contributions to food banks and children's cafeterias.
5) Building a structure that guarantees food security
We will build a structure for regularly evaluating Japan’s food security situation in normal
times by utilizing and analyzing a variety of indicators that illustrate factors such as the stateof domestic food availability and supply chain conditions, including logistics. Additionally, toenable the relevant ministries and government agencies to coordinate responses whencontingencies occur, alongside building a structure for carrying out government-widedecision-making, the government will work to develop a legal system that will form the basis
for responding to contingencies.
(2) Greening agriculture, forestry and fisheries
In order to guarantee sustainable food production amid the advance of factors such as
climate change impacts arising from greenhouse gases and the loss of biodiversity, it will benecessary to take measures for reducing environmental burden.
To that end, we will build a food system that is in harmony with the environment byimplementing initiatives such as promoting organic agriculture, implementing collaborations
between food operators and producers aimed at expanding demand for organic agricultural
produce, making producers’ efforts to reduce their environmental burden visible, utilizing the
J-Credit scheme in the agricultural sector, and strengthening the role of food companies in29

reducing food loss and waste, toward achieving the Strategy for Sustainable Food Systems,
MIDORI.
Additionally, we will promote converting the format of fisheries resource management andoperations based on changes in the marine environment, and converting to artificial seed in
the aquaculture industry.
(3) Expanding exports of agricultural, forestry and fishery products and foods
Although Japan’s domestic market is contracting accompanying the country’s shrinking
population, foreign markets are expanding. Amid that, we will work to promote exports inorder to maintain the domestic agricultural production base and make exports an “earnings”
pillar for the local region.
We will aim to reach its target of 2 trillion yen of agricultural, forestry and fishery products
and food exports in 2025 early, toward reaching its target of 5 trillion yen in 2030. Along withsupporting the formation of large-lot export production areas, a structure for strategic
exporting in which supply chain participants are unified will be developed and strengthened,
including through export support platforms that provide finely-tuned on-site support, and the
expansion of export promotion organizations by product category.
Furthermore, the government will strengthen the safeguarding and utilization of
intellectual properties overseas, through promoting the work of plant breeders’ rights
management organization that act as agents to apply for and license plant breeders’ rights, inorder to prevent plant varieties from flowing overseas.
(4) Smart agriculture, forestry, and fisheries industry
In order to strengthen production capacity in production areas amid the falling number of
producers, alongside developing smart technologies through industry-government-academia
collaboration, we will build a structure that encourages the reform of distribution and sales
approaches and cultivation methods in order to respond to new technologies across the supply
chain as a whole.
In addition, we will introduce the adoption of smart technologies in the forestry and fisheryindustries as well.
4. AI
The performance of generative AI (AI that generates content such as text and images), which
utilize foundation models (large-scale AI that learn large quantities and varieties of data andserves as the basis for AI for various uses), including large language models, is improving,and it is becoming capable of generating natural text, images, speech, programs and othercontent as a result of dialogue with human beings. In these and other ways, AI is making rapid
progress and its use is beginning to spread rapidly even among individuals who are notspecialists.
Compared to conventional AI models, with generative AI the performance is influenced by
the scale of the computational resources and data influences to a greater extent, so there is apossibility that large AI will become increasingly predominant as a result of competitions ofscale.
Additionally, as data concerning Japan is scarce among the data that AI use to learn,consequently not only is it conceivable that AI may be unable to provide appropriate answers
to questions relating to Japan, given the highly reliant on offshore AI products and services,
there is also a possibility that Japanese citizens’ lifestyles and industries will be impacted,
including through supply disruptions.
Furthermore, as a result of generative AI’s technological advance and spread, there is30

mounting concern worldwide about the uncertainty and risks that it poses to society, including
the inability to grasp what sort of data AI is processing and how, and the subtle spread of
disinformation. Risks on the security front are also being pointed out.
In light of this, alongside promoting an international discussion on AI and responses to thevarious risks, the government will work to promote the use of AI and to strengthen AI
development capabilities.
(1) Responding to risks and the international discussion
It is important to prevent the inappropriate use of AI and to promote utilizing human-centric,
trustworthy AI. “Trustworthy AI that is in line with democratic values” is a shared G7 visionand goal. Particularly with regard to generative AI, “Hiroshima AI Process” that wasestablished by the G7 members, in a prompt manner, the G7 will hold discussions the relevant
ministers, and we will report on AI governance by the end of this year. Japan need to take theresponsibility in continuously leading the discussion.
To realize human-centric, trustworthy AI, it will be necessary for AI developers, service
providers and AI users to be aware of and evaluate AI risks (such as breaches of confidential
information, or misuse for committing crimes), and will also be necessary to prepare
governance mechanism capable of responding to both ordinary circumstances andemergencies. With a view to achieving this goal, international fora such as OECD and Councilof Europe are discussing different approaches including legal system, auditing andcertification system, and voluntary guidelines etc.
The various risks associated with AI, such as the inappropriate use of personal information,
security-related concerns, societal disruption arising from disinformation and misinformationand possible copyright infringement , will need to be considered and addressed, taking into
account international discussions and rapid technological changes, while considering theschedule of the “Hiroshima AI Process.”(2) Promoting the use of AI
In order to accelerate the use of AI, we will promote the construction of a data linkage
infrastructure on fields such as medical care, long-term care, administration, education, financeand manufacturing, the realization of the DFFT concept, human resources development, andthe development of a business environment for startups.
The utilization of generative AI by government institutions poses risks such as confidential
information leaks on the one hand, but it also has the potential to be effective in improving
work efficiency and administrative services 8, and how generative AI is handled is an important
point of contention. Consequently, the tentative use etc. of AI will commence at government
institutions, and knowledge will be collected and shared.
In the field of education also, the use of AI has the potential to increase educational
outcomes and reduce teachers’ burdens. On the other hand, it also poses pressing challenges,
including generative AI being used to complete homework, and the difficulty in determining
whether or not something has been generated by AI. In light of this, we will draw up guidelines
on the use of generative AI in the field of education by summer this year.
Looking ahead to the spread of generative AI, we will also enhance AI literacy education,such as basic knowledge of AI.
(3) Strengthening AI development capabilities
It will be necessary to rapidly cultivate Japan’s foundational research and development
capabilities regarding generative AI in order to maintain and improve the level of Japanese
research, generate innovation and new industries and so on. The development and31enhancement of computing resources, which could also be described as AI development
infrastructure, will be rapidly advanced.
Furthermore, given that large quantities of good quality data are required for thedevelopment of generative AI, a mechanism will be promptly constructed that will enable
companies and universities etc. to access data held by public institutions and use that data fordevelopment, while bearing copyright and similar issues in mind. Data in fields where there isa significant need for AI will also be developed.
The massive amounts of electricity that AI consumes is also an issue, and along with thedecentralized location of data centers, we will promote the development of equipment such asenergy efficient semiconductors suited to computation for AI, and aim for early social
implementation.
Incidentally, in undertaking these initiatives, players’ efforts will be accelerated rapidly,
flexibly and intensively, based on the speed of technological innovation and while paying theutmost respect to market principles. Additionally, in light of the possibility that the promotionof technology use by disclosure of technology will generate new technological innovation, an
environment will be prepared for providing computing resources and data, as well as basetechnologies etc. that can be openly used. And we will build an environment for research andhuman resources development, in which leading personnel from around the world can cometogether and join forces.
Furthermore, even worldwide, a large number of startups can be seen rising to the challenge
in this sector, and so startup policies will also be used to support a variety of ideas, including
the development of AI and the development of peripheral apps and services.
(4) Strengthening the government’s study framework
Various ministries and government agencies will cooperate on drafting and promoting
policies for responding to the many challenges related to AI, around the axis of the expert
panel on AI Strategy Council and the AI Strategy teams operated by the relevant ministries
and agencies.
In addition, amid the rapid changes that is occurring in the social situation and technology,
information on new points of contention or unforeseen circumstances will be continuously
gathered from sources such as various research circles and international forums.
5. DX(1) Developing the environment for promoting Web 3.0
Innovations are emerging, including NFTs (non-fungible tokens) and DAOs (decentralized
autonomous organizations), which are based on blockchain technology. Blockchain
technology can potentially change the nature of the conventional Internet and transformsociety through the multi-polarization of virtual spaces, such as direct interconnection of
independent users. In response, we will promote consideration of the development of anenvironment for the promotion of Web 3.0.
Regarding the handling of crypto assets on the tax treatment, it will be considered promptly
whether or not it is possible to treat cases in which third parties hold crypto assets on an
ongoing basis for purposes other than short-term trading as different to other crypto asset
holdings, including approaches on the legal and accounting fronts.
The Accounting Standards Board of Japan will be encouraged to discuss accounting
procedures concerning crypto assets. In parallel to that, the formulation of guidelines will bepromoted at the Japanese Institute of Certified Public Accountants and industry organizations
concerned with crypto assets, in order to promote corporate-side understanding of audits

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concerning Web 3.0, and cultivate understanding on the certified public accountant/auditing
firm-side.
Where the targeting for investment of crypto assets and tokens by investment Limited
PartnerShips (LPS) is concerned, we will proceed with examining and organizing the actual
state of fundraising through crypto assets and tokens and work to add them as investment
targets, with a view to amending the legislation in the next fiscal year.
New use cases will be uncovered and supported, toward the international expansion ofcontent business such as art and games that utilize digital technology.
Professionals who can handle advanced digital technologies such as block chain
technologies will be secured and fostered. An environment will be created where overseas
experts can play an active role by creating networking opportunities for the collaboration
between domestic and foreign Web 3.0 experts. We are collecting opinions and issues fromlocal governments and business operators that are interested in promoting DAO initiatives
through the consultation service for local governments and business established at the Digital
Agency.
(2) The realization of post-5G and 6G
As well as promoting the development of post 5G information communication systems, wewill also provide support for the so-called 6G, a next-generation communication infrastructure.
To introduce these improvements in around 2030, technologies will be established that willrealize transmission speeds that are 100 times faster than current standards. Ultra-low power
consumption of 1/100th that of current technologies will also be realized. These improvements
will be achieved by utilizing optical communication technologies for everything fromnetworks to devices.
In addition, we will promote acceleration, implementation, and export of research anddevelopment in order to achieve promptly implementation of a Non-Terrestrial Network(NTN) that enable communication across extensive areas, including air, sea, remote islands
and mountainous regions that conventional networks do not reach, through satellite
communication and communication from the stratosphere utilizing High-Altitude Platform
Station systems (HAPS).
By 2025, Japan will implement a demonstration project in around 10 countries including
Chile, Thailand, Vietnam and the Philippines for a system that enables 5G base station
networks to be built by freely combining the equipment of different vendors from like-mindedcountries, so-called “Open RAN.” In cooperation including with the U.S., Japan will work
toward acquiring a global share in particular in the countries and regions of the so-called“global south.”(3) Developing the environment for promoting the investment in DX
1) Developing the digital market environment
Under the Act on Improving Transparency and Fairness of Digital Platforms (TFDPA),
online mall and app store operations will be evaluated for the second time this fiscal year,
leading to improved trading relationships. That evaluation will include the status of efforts toaddress challenges such as reasonableness and transparency in terms of the level andpositioning of the operations’ usage charges. Additionally, with regard to the digitaladvertising sector, which was added to the TFDPA’s coverage last year, operations byregulated businesses will be evaluated during the current fiscal year, and where needed, we
will seek responses such as enhanced disclosure of trading terms.
Regarding the mobile ecosystem (markets for OS-based apps and other applications on
smartphones), based on the Secretariat of the Headquarters for Digital Market Competition’s final

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report on the competition assessment, we will consider a legal framework necessary to ensure a fairand equitable competition environment in the digital market, while assessing the situation in othercountries such as Europe and United States.
2) Cyber security
To enhance cybersecurity throughout the supply chain, we will promote the development of
human resource of the security at companies and government, etc., and alongside that, we will
also subsidize the introduction of security systems by SMEs. We will promote the utilizationof recently-formulated guidelines, and we will also support cybersecurity measures for IoT
devices manufactured by SMEs.
As cyber-attacks become more sophisticated and complex, we will also take the lead instrengthening countermeasures against cyber-attacks and the capacity to analyze systemvulnerabilities. In order to work toward aligning standards with those of like-minded countries,
we will draw up guidelines on reducing vulnerabilities at the software development stage andusage stage, and on managing information such as licenses, before the end of this fiscal year,
and we will promote their use. In addition, we will also present a direction for the developmentof a domestic system for evaluating the compatibility of IoT devices’ security requirements.
As a response to disinformation and misinformation in the digital space, we will engage in
improving digital literacy through the development of educational materials, workshops, etc.
3) Establishing a new framework of trust for the Internet
Regarding the Trusted Web, a new trust framework on top of the Internet that provides
mechanisms to strengthen data control by individuals and corporations without relying on
specific services, and mechanisms to verify exchanged data, we will support and verify
practical use cases and make the benefits visible, with the aim of concrete implementation
examples being generated by FY2025. Furthermore, we will collaborate with other countries,
mainly the G7, and relevant organizations in identifying issues and areas for improvement.
4) Promoting the Digital Government
We aim to realize the Digital Government by promoting the digitalization of local
governments or providing and improving the digital infrastructure for the central and local
governments such as the Government Cloud that ate convenient for users.
5) Promoting the use of Individual Number Cards (My Number Cards)
Although the total number of Individual Number Card (My Number Card) applications has
exceeded 97 million (three-quarters of the population), along with striving to ensure thesystem’s security and credibility, we will continue to promote the development of the issuancesystem in cities, towns and villages, as well as encourage expanded use of the cards, including
their use in private-sector services, and their integration with health insurance cards anddriver’s licenses.
6) Improving the convenience of financial services that utilize digital technologies
Where financial services are concerned, there are suggestions that in the case of banks, forexample, their online banking procedures and processes when opening, changing the name ofor closing accounts are complicated for consumers. The government will conduct an
exhaustive review of financial services and procedures that are difficult for consumers to use,and seek improvements in what is necessary from the perspective of improving conveniencefor consumers.

347) Credit card interchange rate transparency
Based on the fact that the default interchange rates (the fees paid by the credit card company
contracted by the store to the credit card company contracted by the user), have been madepublic, we will carry out a monitoring study on the impact on the competitive environment.
8) Promoting digital health
To help promote digital health initiatives, the implementation of voluntary certification
systems for healthcare products and services will be supported. Furthermore, in order topromote the provision of high-quality personal health record (PHR) services, we will promote
their use and application in day-to-day life, and the standardization and verification of data fordata coordination with medical institutions, pharmacies etc.
9) DX for small and medium-sized enterprises
To promote DX amongst SMEs, we will disseminate tools for diagnosing management
issues, provide expert support, and assist firms in introducing IT systems.
In addition, in the interests of making responses to invoicing systems more efficient, we will
promote the standardization of data and the development and dissemination of tools such asaccounting software, in order to make it possible to coordinate business-to-business trading
data, such as invoicing and payments, across the entire supply chain. And we will carry out afollow-up toward discontinuing the use of promissory notes and checks.
10) DX for medical care and long-term care
The government and relevant industries will work together on establishing a national
medical information platform that makes it possible to share and exchange information on
medical care and long-term care, and initiatives such as applying DX to the revision of medical
service fees and standardizing electronic medical record information. In doing so, given that
medical DX is something that will open up the future of Japan’s medical care, we will takeresponsibility for leading these measures. We will steadily implement Cyber security measuresetc. at medical institutions, additionally, we will promote the use and application of medical
information based on the enactment of the amended Next Generation Medical InfrastructureAct.
11) Architectural and urban DX
Priority will continue to be placed on promoting the use of three-dimensional data (building
information modeling, or BIM) on building shape, material, and construction methods, 3Dmodels (PLATEAU) for deploying building, roads, etc. in cities, and unique identification
numbers for land and buildings (Real Estate IDs).
6. Promoting science, technology and innovation through public-private collaboration
Amid the challenges that are emerging from authoritarian states, the ultimate winner will bedecided by the power of science and technology. Science, technology, and innovation have thepower to address many social issues confronting the world today, such as infectious diseases,
global warming, and declining birthrates and aging populations. The public and private sectors
will work in partnership on a radical expansion of science and technology investment, leading
to Japan’s renaissance as a scientific and technological nation.
(1) Quantum technology
We will conduct research and development on quantum computers, quantumcryptographic communications and their basic technologies, and establish research and35

development and demonstration hubs. We will develop a demonstration environment that isaccessible to startups during the current fiscal year. By FY2028, we will develop platform
software to manage quantum computers and classical computers in an integrated manner, inorder to enable their application in specific use cases that require complex calculations, suchas energy and food issues, the development of materials, and drug discovery.
(2) Health and medical care1) Developing methods for treating and suppressing the onset and progression of cranial nerve
diseases such as dementia
For Japan, which is approaching an era of extreme population aging ahead of otherdeveloped countries as its average life-span increases, preventing and treating cranial nerve
diseases such as dementia, and undertaking the research and development to achieve that, areimportant challenges.
Japan will capitalize on its strengths as the developer of the world’s first drugs for treating
Alzheimer’s disease, with the aim of developing drugs for treating dementia and for
fundamentally suppressing the disease’s onset and progression.
To that end, along with establishing a new national project on brain science and bolsteringinternational networks, we will implement combined industry-government-academia researchthat is both clinical and foundational in direction. Maximum use will be made of clinicalinformation on cohorts of patients and able-bodied individuals suited to clinical trials that canbe continuously followed up, and of biobanks of information including genomes and samples
such as blood and other material obtained from participants. Through these efforts, we will
carry out research and development and establish a foundation for research and developmentof treatment methods on preventing dementia and suppressing its onset and progression
through the removal of built-up materials such as amyloid beta plaque, as well as in fields suchas restorative treatments through the rehabilitation and repair of neural pathways.
2) Promoting next-generation pharmaceutical development, including genome pharmaceuticaldevelopment
Japan will break away from development centered on conventional small-molecule drugs,
and will strengthen pharmaceutical development in fields for which there are strong needs ona global scale, such as high-performance biopharmaceuticals and low-cost, orally administered
middle-molecule drugs that work effectively on the causes of diseases. If Japan undertakes
research and development and the creation of supply bases while limiting itself to domestic
frameworks, it risks falling behind in terms of the speed of development and supply. We will
work to construct an international framework for new drug development and supply bypromoting collaborations between companies and research institutions in Japan, and startup
foundries in like-minded countries such as the U.S.
With regard to the whole genome analysis (analysis of all the genetic information containedin DNA) of cancer and intractable diseases, along with continuing to steadily promote analysis
for the 100,000-genome scale and the development of an information platform for passing
those results on to patients, a decision on the corporate form of a project implementation
organization will be decided by the end of this fiscal year, toward its launch in FY2025.
This project implementation organization and genome biobanks will play a central role incollaborating with relevant medical institutions, research institutions, startups, etc., not onlyin the medical and pharmaceutical fields but also in different fields such as mathematicalscience. They will work to enhance the success rate of pharmaceutical development by
utilizing and applying the results of whole genome analysis and multiomics (a method ofanalyzing specific cases collectively and comprehensively using multiple methods such as

36

DNA analysis, RNA analysis and protein analysis), and clinical information etc.
3) Regenerative medicine
Based on advances in new technologies, and from the standpoint of disseminating andexpanding regenerative medicine appropriately, we will consider amendments to legislationsuch as the Act on the Safety of Regenerative Medicine, and will submit them to the Diet at
an early date.
(3) Fusion energy innovation strategy
Fusion energy is being counted on to realize a future clean energy and create industries as aresult of technology spin-outs. Along with establishing a framework for building industrygovernment-academia consensus on fusion energy, and strengthening research anddevelopment at private-sector companies including startups and universities, we willencourage investment through public-private collaboration. And we will promote thedevelopment of international standards by cooperating with like-minded countries to discuss
joint research and safety regulations.
(4) Strengthening research and development capabilities of national research institutions
To address nationally-important issues such as climate change and national security that
require resolution through science, technology and innovation, it will be necessary foruniversities and companies to collaborate around national research institutions and mobilize
resources such as facilities and human resources. To make it easier for national research
institutions to collaborate with other institutions when doing so, we will consider approaches
to collaborations that make medium- to long-term predictability possible.
In addition, to ensure that talented human resources inside and outside Japan are able toengage in joint research and development smoothly while securing mobility between national
research and development agencies, universities and companies, by the end of this fiscal year
we will reach a conclusion on developing rules concerning pensions and retirement payments,
etc. in cases where research is pursued across organizations, based on the current situation,
whereby only some national research and development agencies are able to invest in external
entities, for example, as well as on-site needs, such as approaches to compensation andpensions that are able to secure talented researchers.
(5) Support through the University Endowment Fund
In order to create globally-renowned research universities, a 10trillion yen University
Endowment Fund will be supported for schools which not only build their research capabilities,
but also implement high-quality governance arrangements such as by separating research andmanagement as well as promoting young researchers. A step-by-step screening of universities
eligible for support will be carried out from the current fiscal year, with support to begin in the
coming fiscal year.
(6) Support for the regional core and distinctive research universities
In order to comprehensively promote regional core and distinctive research universities, wewill support initiatives that extend those universities’ strengths and distinctive characteristics.
In addition, from the perspectives of contributing to resolving social issues and generating
innovation in regional areas, and measures for addressing the deterioration of facilities atnational universities etc., we will work on developing and enhancing Innovation Commons (cocreation hub) that can be jointly utilized by regions and the business community.

37

(7) Ensuring access to international human networks and research outputs
Given that access to research outputs including scholarly publications is under the market
dominance of the global academic platformers, we will formulate a national policy to promote
immediate open access to publicly funded scholarly publications and scientific data, andpromote the sharing of research outputs through the G7 and other international venues.
Additionally, we will support the enhancement of the ability to negotiate for universities
and research institutes with academic publishers, the Research DX platforms for opening andsharing research outputs and the ability of researchers and the research community todisseminate their research outputs.
(8) Exchange of international students
In order to rebuild the people-to-people exchanges with other countries that Covid-19
interrupted, we will aim to increase the number of Japanese dispatched to study abroad to
500,000 per year by 2033. To that end, we will work to enhance economic support for Japanesestudying abroad for medium and long-term periods, promote the dispatch of doctoral programlevel human resources, and promote studying abroad from the high-school level.
By 2033, the number of foreign students will be increased to 400,000 per year, and thedomestic employment rate for them will be lifted to 60% (excluding those who go on to further
education in Japan) after graduation. In order to achieve this, strategic initiatives for attracting
students to study in Japan, such as events and information sessions in other countries, will bepromoted, and support for these students will also be implemented by promoting education
programs that center on internships.
(9) Moonshot research and development
We will work to enhance programs such as Moonshot Research and Development Program,in order to respond to new challenges that will emerge according to changes in the social
environment, such as the use and application of fusion energy and innovations in the
agricultural and food sectors that utilize AI, quantum technology and other advanced scienceand technology.
(10) Support for doctoral students, young researchers, etc.
Some support for doctoral students will be shifted to support from the University
Endowment Fund. Accompanying that shift, consideration will be given to enhancing
economic support measures and career path development for doctoral students, with aconclusion to be reached promptly.
In addition, we will promote support for hiring individuals to manage and support research,and improve the research environment for young researchers.
Steadily promote the scheme (Fusion Oriented Research for disruptive Science andTechnology, or FOREST) which provides long-term research funding for up to 10 years toyoung researchers who undertake challenging research, and integrates support to secure an
environment where they can devote themselves to research at the institutions they belong while
enhancing the research environment.
In order to improve the percentage of women who are university students, college oftechnology students and instructors in IT and other science and technology fields, regionallyintegrated initiatives based on industry-government-academia collaboration, including thepromotion of learning in those fields and the selection of them by female junior and seniorhigh-school students, will be accelerated, and initiatives for promoting the appointment offemale researchers to senior positions at universities will be strengthened.
(11) Promotion of IoT
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We will promote IoT for resolving challenges in a variety of fields, through the collection,utilization etc. of front-line data from sectors such as the manufacturing industry andagriculture, forestry and fishery industries.
(12) Expo 2025 Osaka, Kansai, JapanThe Expo Osaka, Kansai, Japan to be held in 2025 will be a “People’s Living Lab” and acatalyst evoking hope for the future through new technology. As a showcase for new
technologies, it will demonstrate how Japan’s leading-edge innovations contribute to society.
In addition to initiatives such as providing eVTOL-based transportation services, the Expo
will showcase Personal Health Record (PHR) utilization and regenerative medicine, hostbusiness contests for startups, and convey the appeal of Japan’s food culture.
While there is a need to move steadily ahead with constructing the venue, as preparations
proceed challenges are emerging on the cost and other fronts, and responses will need to be
made. Along with establishing the exhibition methods for major projects during the current
year, the measures that will need to be taken toward the opening in April 2025, such as
financial arrangements, security measures and support for participation by developing
countries, will be steadily advanced based on an action plan that is updated every six months.
7. Support for creators
Fields such as anime, gaming, entertainment, manga, films, music, and broadcast programs
are one of Japan’s proud cores. Japan will promote support for creators in a broad sense, as it
looks ahead to growth in the global market for content.
We will promote training and creation of the next-generation creators who utilize digitaltechnology via initiatives such as the establishment of programs in which young creators withexceptional talents receive support with their production costs, or are mentored by leading
figures in the content industry. The Council of New Form of Capitalism Realization willconsider integrated measures based on public-private collaboration, such as these and othermeasures for supporting creators, and overseas expansion. In doing so, it will simultaneously
clarify concrete actions for reforming the structure of the content industry.

Ⅴ. Facilitating the Entry and Exit of Corporations, and Promoting the Startup
Development Five-year Plan

1. The necessity of reforming the industrial structure and facilitating the entry and exitof corporations
The higher a country’s average rate of firm creation and destruction (an index of creative
destruction), the higher the per capita rate of economic growth. In addition, young businesses(startups) contribute more to added value creation. On the other hand, Japan’s corporate entry
rate has remained at the low level of 4.4% 9 compared to 9.3% in the U.S. and 12.4% in the
UK. Similarly, its corporate exit rate is low at 3.1% 10 compared to 9.4% in the U.S. and 11.1%
in the UK.
To promote industrial structural reforms such as GX and DX, and to secure sustainablegrowth, we will steadily promote human resource development, supply of funds, and open
innovation as set out in the Startup Development Five-year Plan, with a view to facilitating theentry of new corporations. At the same time, we will work on building an early-stage
consultation structure to facilitate M&A, business succession, or business closures forcorporate managers who wish to exit.

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2. Promoting the Startup Development Five-year Plan
(1) Basic concept
Japan faces mounting social challenges and the continued issues of population decline andsluggish economic growth, and it has been pointed out that a sense of stagnation is spreading
across the society as a whole. Under the new capitalism, we will focus on the public roles not
only of the government, but also of the private sector, and revitalize an increasingly rigid
Japanese society through public-private partnership to fundamentally review conventional
systems and practices. Startups play an important role in achieving this. Startups exist to
resolve social issues with a sense of urgency, through new technologies and ideas. At the sametime, they also provide new stimulus to revitalize markets and improve the productivity ofexisting corporations.
Rapid social and economic changes around the world in recent years have made the startup
environment increasingly severe, making it even more important than before to formulate
policy responses to startups.
The Startup Development Five-year Plan, formulated in November last year, sets out thetarget of “increasing the scale of investment (in startups) by more than a factor of 10x (to 10
trillion yen) by FY2027.” To realize this goal, we face the urgent task of improving systemic
aspects, such as the legal and tax systems that are indispensable to the development of a startup
ecosystem, in the early stages of the Plan. In addition to stock option systems, financial andfunding legislation, R&D funding, resident status, and tax systems are also fundamental
systems that form a part of the startup ecosystem. Hence, it is essential to develop such systems
as soon as possible.
Based on the Startup Development Five-year Plan formulated in November last year, we
will implement the concrete measures set out below, including the in-depth review thereafter.
The Minister in charge of Startups will follow up with the process in line with KPIs establishedunder each policy, and efforts will be made toward the realization of broad direction goals in
the public and private sectors.
(2) Targets
In terms of targets, it is important to focus not only on the "number" of startups (the numberof businesses that are started), but also on the growth, or "expansion of scale," of the startups
that have been established. Therefore, the focus will be on the amount of investment in startups
as an indicator that encompasses both the absolute number of startups and the expansion ofscale of the startups that have been established.
The amount of investment in startups has increased by a factor of 2.3x over the past five
years to 2021 (from 360 billion yen in 2017 to 820 billion yen in 2021), and is currently in the
800 billion yen range, but, by implementing the Startup Development Five-year Plan, thepublic and private sectors will work together to achieve the major target of increasing the scaleof investment by more than a factor of 10x (to 10 trillion yen) by FY2027, five years fromnow.
Furthermore, in the future, by creating 100 unicorns and 100,000 startups, the aim will be
to make Japan the largest startup hub in Asia and one of the world's leading clusters of startups.
(3) Package direction
Nurturing many key players in the startup sector accelerates entrepreneurship. To uncoverand develop young talents with outstanding ideas and technologies, we aim to nurture practicalentrepreneurs by improving the environment for stock options, as well as utilizing domestic
and overseas mentors and educational institutions. In addition, we will develop human40resources who can play a key role in creating startups in Japan, such as by dispatching young
talents to countries around the world for training, and build a global network comprised ofsuch talents.
In tandem with securing key players in Japan, we will also work on expanding the supplyof funds, including public funds. To that end, we will work on attracting overseas investors
and venture capital firms, in addition to developing venture capital firms in Japan. Furthermore,
we will promote the diversification of business development and exit strategies for startups,
with a focus on deep tech startups that require time to grow.
Thus, startup acquisitions are important both as an exit strategy for startups and as a meansfor promoting open innovation in existing large companies. It is important to develop an
environment that promotes open innovation where existing companies collaborate withstartups.
In the Startup Development Five-year Plan, the following three major initiatives will bepromoted in an integrated manner:
1. Build human resources and networks for creating startups
2. Strengthen funding for startups and diversify exit strategies
3. Promote open innovation
Efforts will also be strengthened in the areas of entrepreneur education and startup creation
support that are specialized for individual deep tech fields such as agriculture and medicine.
(4) Building Human Resources and Networks for Startup Creation
In terms of the percentage of people who consider starting a business to be a desirable
occupational choice, Japan is at the lowest level among major and developed countries, at 25%,compared to 79% in China and 68% in the US. 11 For this reason, it is necessary to promote thedevelopment of human resources who aspire to create startups.
1) Improve the environment for stock options
In the U.S., stock options are utilized actively, as they account for 15% to 18% of all sharesissued by Startups. However, the utilization rate of stock options is below 10% in Japan. 12 To
further promote the use of stock options, we will consider reviewing procedures under theCompanies Act and tax systems.
(i) Legislative measures regarding rules under the Companies Act toward the realization ofstock option pools in Japan
In the U.S., there is widespread usage of so-called stock option pools, in which a certain
amount of stock option issuance limits is set in advance and stock options are then flexibly
granted to employees. In Japan, the Companies Act requires that stock options be granted to
employees within one year of the establishment of a stock option tranche based on a resolution
at a general shareholders' meeting, and such flexible issuance of stock options is not
permitted. 13
In light of this, legislative measures will be taken regarding rules under the Companies Act
to enable the inclusion of details such as the prices and exercise period for the exercise of stockacquisition rights, within the contents delegated from the general meeting of shareholders tothe board of directors.
With regard to the delegation of decisions on solicitation matters related to the issuance of
new subscription rights, as the effective period of the resolution for delegation from the general
meeting of shareholders to the board of directors is currently one year or less, we will consider
the measures to remove this restriction.
A resolution by the general meeting of shareholders is necessary for determining the ceiling41

for the issuance of new subscription rights. However, it has been pointed out that this lacks
flexibility as it is necessary for all shareholders with voting rights to express their intentionsin writing in order to consider that the resolution has been passed without the actual conventionof a general meeting of shareholders. We will conduct the necessary consideration to address
this.
(ii) Review of systems for tax-qualified stock options
It is important to enable startups that require time for business development and startups
that wish to spend a long time as unlisted companies in order to expand their business,particularly in the field of deep tech, to choose their IPO timings flexibly. With regard to thestock options that are used globally as remuneration for startup employees, under the FY2023
tax reforms, the exercise period was extended from 10 years to 15 years in the case where
stock options are granted until five years from the founding of the company. This increases
the flexibility of the timing for exercising rights (listing), corresponding to the business growthof startups, and also enables applicability with simple procedures.
Furthermore, from the perspective of simplifying startup procedures, it has been decided
that the obligation to entrust stock certificate custody will be eliminated. In the first place, therequirement to entrust a physical stock certificate in custody for tax-qualified stock options
creates constraints in situations such as M&A. Therefore, we will consider abolishing therequirement to entrust a stock certification in custody for tax-qualified stock options forprivately held companies, paying attention to the facts that transfer restrictions are placed onshares in privately held companies under restrictions imposed by the Companies Act, and thattax processing is carried out by the issuing company and the stock option grantees.
Granting tax-qualified stock options to highly skilled external human resources is limited tostartups that meet a certain set of criteria, and it is necessary to draw up plans that are approved
under the Small and Medium-sized Enterprises Business Enhancement Act. With regard to
this approval system, a survey will be conducted to consider allowing the granting of taxqualified stock options without imposing the burden of procedures associated with obtaining
approval.
From the viewpoint of improving the ability of startups to acquire human resources, we will
also consider significantly raising or abolishing the ceiling amount for tax-qualified stock
options.
In addition to the above, we will put effort into enhancing convenience, including
streamlining procedures related to tax-qualified stock options and further reviewing
requirements, in order to create a startup-friendly system.
(iii) Formulation of rules to calculate stock prices for unlisted companies
The exercise price of a tax-qualified stock option must be higher than the stock price at thetime of the conclusion of the contract associated with the stock option in question. With regard
to the calculation of the stock price in question when an unlisted startup introduces taxqualified stock options, in addition to the stock price calculated based on actual trading cases,
calculation using the net asset value method (a simple calculation method for small companies todetermine appraised value by deducting the amount of liabilities, etc. from the value of the company's total
assets) set out in the basic notification of property valuation, is also permitted. Moreover, itclarifies that, if a company issues class shares, the price of the class shares will be calculatedusing the net asset value method while taking into account the contents of the shares.
Improvements will be made in this area, such as the prompt issuance of official directives.
At the same time, there have been comments that it is not clear when a special resolution at
a general meeting of class shareholders is required for class shares. As such, while also taking
into account actual needs, we will conduct the necessary consideration including clarifying the42requirements.
2) Expand and horizontally develop of support projects by mentors
As a program to select and support young human resources in Japan in the field of IT, underthe "MITOU Program" (implemented by the Information-technology Promotion Agency,
Japan) leaders in the industry and academia have been serving as mentors to discover (conduct
selection screening) talented human resources and provide guidance for projects. As it ismeaningful to expand this initiative horizontally and on a large scale, it will be rolled out
laterally to other agencies (such as the New Energy and Industrial Technology Development
Organization, National Institute of Advanced Industrial Science and Technology, Japan
Agency for Medical Research and Development, Japan Science and Technology Agency,
Japan Aerospace Exploration Agency, National Agriculture and Food Research Organization,etc.). At the same time, we will expand the targets of initiatives toward the development ofyoung human resources, with a focus on students from colleges of technology (KOSEN),
senior high school students, and university students. Overall, we aim to increase the numberof mentees from 70 people a year to 500 people a year over the next five years.
In addition, the global startup acceleration program will be promoted, which implementbusiness strategy formulation for domestic startups, mentoring with experts, and network
expansion, etc.
3) Establish entrepreneur development hubs overseas ("Dejima" programs)
For dispatch programs that select 20 young people who want to start a business and thendispatch them to Silicon Valley, over a five year period the scale of dispatches will be
expanded to about 1,000 people. In doing so, the program will be structured to recruit a wide
range of human resources, including students and female entrepreneurs. In addition, from theperspective of securing opportunities to receive guidance from mentors, which are still
restricted in Japan, intern trainings, etc. will be added at US cities that are hubs of innovation(such as Silicon Valley, Boston, New York, San Diego, and Austin) and at startups, venture
capital firms, and accelerators, etc. in Israel, Singapore, Northern Europe, and other parts of
the world. Furthermore, hubs for Japanese businesses will be newly established in Silicon
Valley and Boston.
4) The Global Startup Campus Initiative
In order to contribute to the global expansion of human resources and to research seeds fromJapanese universities and research institutes, the Global Startup Campus will be created in thecenter of Tokyo through public and private funding that is equipped with international joint
research and incubation functions in deep tech fields by attracting top overseas universities
and by inviting outstanding researchers. To that end, feasibility studies will be conducted with
the Massachusetts Institute of Technology (MIT) in the U.S., and we will work on promoting
the following initiatives:
 The aim will be to promote the establishment of long-term and stable cooperative
relationships with top overseas universities, etc., and in managing the campus, to build
the campus's own endowment (university fund) and realize strategic management.
 Revitalize research and development at domestic universities and encourage reforms.
Rather than waiting for the completion of campus facilities and equipment, joint researchand researcher exchanges with overseas universities, etc. will be proactively implemented,
working to quickly create startups. In addition, these initiatives will work to develop
doctoral course students and young researchers who will globally play an active role not
only in academic fields, but also in startups and venture capital firms.
43









Access to overseas ecosystems and global inner circles will also be possible through theutilization of entrepreneur training and incubation programs held by overseas universities
and the formation of networks with top overseas venture capital firms.
Collaborating with domestic and foreign companies will improve the ability of domestic
companies to create innovation through joint research and entrepreneur development
programs, etc. on the Global Startup Campus.
In cooperation with relevant local governments and from the perspective of strengthening
the ecosystem through urban planning, a truly global campus will be formed by promoting
measures in an integrated manner, such as by improving the living infrastructure forforeign human resources.
This initiative will be a free "place of practice" that is not bound by the rules of existingorganizations, and, from that point of view, under the Minister in charge of Startups whowill act as a "guiding light" function, there will be coordination on a variety of measureswith the aim of creating the campus in a centralized and efficient manner.
In addition to working on organic collaboration with universities and research institutes
across Japan, in order to create and develop startups, in particular, efforts will be made topromote joint research and personnel exchanges with Okinawa Institute of Science andTechnology (OIST) which is already equipped with a global mindset.

5) Implement entrepreneur development programs in cooperation with the U.S.
A framework will be established to fundamentally strengthen the ability to commercialize
research outcomes. Under this framework, researchers and graduate students from Japan will
participate in entrepreneur development programs conducted by the U.S. side for researchersand graduate students based on agreements between the governments of Japan and the U.S.
6) Establish Japan-U.S. personnel exchange programs in the field of startups and venture
capital firms
To fundamentally strengthen the development of both Japanese and U.S. human resources
who possess expertise and networks that are globally relevant, personnel exchange programsfor both Japan and the U.S. will be established based on agreements between the governmentsof Japan and the U.S. These programs provide opportunities to graduate students and otheryoung people to work (intern) for the long-term and in paid positions, at startups and venture
capital firms that drive the creation of advanced technology.
(7) Enhance entrepreneurship education, including the creation of entrepreneur development
programs for Japan at U.S.-based business schools
In Japan, there are limits to providing educational programs with strengths in entrepreneur
development. In view of that, feasibility studies will be conducted to consider developing anenvironment that allows students to earn their degrees while working in Japan. This includes
the establishment of MBA programs for fostering entrepreneurs at U.S. universities, targeted
at students in Japan, which are conducted through online systems.
(8) “One University, One Exit” movement
In order to support the creation of university-launched startups, research universities acrossJapan will roll out a movement to "start 50 companies per university, with one company aiming
to exit'."(9) Support startup creation at universities and for elementary, junior high, and high school
students

44

Support will be provided for the commercialization, including global dissemination, of
university research outcomes for more than 5,000 projects over five years, with a focus on theeight Startup Cities in the Startup City Project Japan and with the participation of overseas
accelerators and venture capital firms.
At the same time, we will promote the following initiatives as a support measure for startup
creation at universities and among elementary, junior high, and high school students.
 Promote the introduction of a "cross-appointment system" that allows researchers, etc. toconclude employment contracts with both companies and universities/ colleges oftechnology (KOSEN).
 Promote a support program for entrepreneurship education that invites entrepreneurs as
lecturers for elementary, junior high, and high school students, and expand
entrepreneurship education for elementary, junior high and high school students by
utilizing class hours such as "integrated study" classes.
 Currently, support is provided to 16,000 undergraduate and graduate students and 1,400
high school students annually to study abroad. However, as some undergraduate andgraduate students who receive education in the U.S. and Europe feel the burden of
repaying large amounts of scholarships, Japan aims to expand support over the medium
to long-term. Additionally, we will also expand this support to junior and senior highschool students in order to spread the entrepreneurial spirit in Japan.
10) Strengthen entrepreneurship education at colleges of technology (KOSEN)In addition to introducing entrepreneurship education at colleges of technology (KOSEN),
collaborations among KOSEN as well as between universities and colleges of technology(KOSEN) will be promoted. To realize global expansion, we will also promote cooperation
with Startup Cities.
From the perspectives of nurturing startups as well as human resources who have advanced
practical technical skills, we will develop an environment to facilitate the transition fromtechnical high schools to colleges of technology (KOSEN). In doing so, reviews will also be
conducted on providing governmental support related to the transition.
In addition to encouraging the holding of contests such as robot contents and deep-learning
contests (DCON), which have great impact on improving technical skills and problemsolving skills among KOSEN students, information dissemination will also be strengthened
through cooperation with the media.
11) Strengthen initiatives in Startup Cities
Budgets and systems related to Japan External Trade Organization (JETRO), which
provides support for the global expansion of the Startup Ecosystem, will be radically expanded
to enable to the strengthening of its activities as well as the continued expansion of these
activities to each Startup City. In doing so, we will consider measures to ensure continuousand permanent assistance.
12) Intellectual property strategy for startups and universities
In addition to promoting the reforms on the governance of universities’ intellectual property
based on the University Intellectual Property Governance Guidelines, we will consider diverse
forms of evaluation in university evaluations and government funding systems, such as theincorporation of license income into the evaluation items, since the number of patents is not
the only important factor in conducting evaluations.
To promote the creation of innovation by startups, push-type support from examiners in thephase pf patent examination will be implemented soon.

4513) Expand researchers in research fields
In order to realize world-class research universities, support, based on the Universities forInternational Research Excellence Act, will be provided through the 10-trillion yen University
Endowment Fund. Additionally, there will be efforts to improve the treatment of doctoral
course students and to improve research environments for them, with the aim of tripling by
2025 the number of doctoral course students who receive an amount equivalent to their living
expenses (equivalent to 70% of those who enter from master’s course).
As further support measures for doctoral degree holders, the inclusion of doctoral degrees
on the business cards of public employees will be encouraged. And a change in the awarenessof the use of doctoral degrees in private companies will be encouraged.
14) Attract more foreign entrepreneurs and investors
Currently, foreign entrepreneurs are permitted to enter and stay in Japan for up to one year
on a Startup Visa (Foreign Entrepreneurship Promotion Project), but the persons confirming
this visa are limited to local governments that are authorized by the national government.
Taking reference from cases in various countries such as the UK, we will establish, within
this year, a framework that allows government-certified venture capital firms, incubators,
accelerators, and other private-sector organizations to carry out, in place of local governments,
verification procedures for issuing startup visas to those preparing to establish startups. While
this will be based on the premise of verifying the activities of those obtaining the visa, theprocedures will be designed to be simple and fast in the same way as in other countries, inconsideration of the burden they may place on business operators.
In addition, we will consider extending the maximum period of stay by utilizing
mechanisms such as the National Strategic Special Zone Program to Increase Foreign
Entrepreneurs to extend the length of stay allowed under startup visas. We will also consider
the nationwide rollout of the same system.
Furthermore, while taking reference from cases in various countries such as the UK andutilizing the National Strategic Special Zone framework, we will consider creating a new visa
for investors (including angel investors). A certain amount of investment in Japan will be set
as the criteria for obtaining this visa, based on factors such as the amount of assets and trackrecord of investment in startups.
To attract international remote workers (so-called “digital nomads”), identify and study
issues, including visa and residency status, and a system will be established within this fiscal
year.
We will work on improving the living environment of foreign nationals, such as bysimplifying and speeding up processes on the acquisition of real estate and opening of personalbank accounts for those who have obtained startup visas and investor visas, facilitating thesmooth granting of university entrance qualifications to foreign children who have graduatedfrom international schools, and providing multilingual support and developing online systems
in administrative organizations and medical facilities.
15) Strengthening support and improving the environment corresponding to the characteristicsof the fieldⅰ) Biotechnology
With a view to boosting the creation of drug discovery startups, we will strengthen
connectivity between ecosystems in Japan and other countries. This includes efforts to improvethe mobility of human resources between Japanese researchers and global pharmaceuticalcompanies, etc.

46

With regard to biotechnology startups in areas such as the development of medical
equipment and research and development on cranial nerve disease, etc. a support system willbe established through industry-academia-government cooperation, including stronger
government support, to facilitate the global dissemination of research outcomes.
ⅱ) Climate tech
Reviews will be conducted mainly by the Ministry of Economy, Trade and Industry, in thefield of climate tech, which is increasingly attracting interest and attention worldwide.
We will consider the possibility of easing regulations, based on factors such as technologicaladvancement and actual needs, in the case of regulations that remain at the same standard evenmany years after their introduction, for example, the safety distance when handling substancessuch as ammonia.
Support will be provided to help cover the development expenses, etc. incurred by startups
that are engaged in the creation of use cases for next-generation semiconductors, toward thestrengthening of user-side initiatives for next-generation semiconductors.
16) Promote the introduction of educational curricula that meet international standards
In regions where talented foreign human resources gather, including Startup Cities, we will
promote educational curricula that meet international standards, such as the International
Baccalaureate, in order to provide adequate opportunities for quality education to thesechildren.
17) Develop an environment toward the utilization of Restricted Stock Units (RSU: stocks
with restrictions on transfers during a vesting period)
RSU are rights that are attached to stocks after a certain vesting period. In the U.S., they are
generally used as a form of compensation or incentive for employees by startups that arelacking in funds in hand. On the other hand, in Japan, it is unclear if the disclosure obligation
on new share issuance of 100 million yen or more per year, stipulated by the Financial
Instruments and Exchange Act, is applicable to RSU. Some have pointed out that this hinders
the introduction of RSU. Hence, efforts will be made to clarify the treatment of RSU.
(5) Enhancing Funding provision for Startups and Diversifying Exit Strategies
Comparing companies that have received venture capital investment with those that havenot, the companies that received investment have been more proactive about creating
employment and innovation. That is to say, venture capital firms have significant abilities forevaluating startups and also have the ability to nurture startups.
In order to do so, the following specific measures to strengthen startup funding provisionand to diversify exit strategies will be promoted:
1) Strengthen the functions of the Organization for Small & Medium Enterprises and Regional
Innovation, JAPAN to invest in venture capital
Although the function for investing 20 billion yen in the Organization for Small & Medium
Enterprises and Regional Innovation, JAPAN (SME Support, JAPAN) has been strengthened,
we will promote limited liability investments in domestic and overseas venture capital firmsthat have financial clout and knowhow in startup development through it.
Furthermore, with regards to the new medium-term goals and plans by SME SUPPORTJAPAN from the next fiscal year, in addition to setting goals to further strengthen limited
liability investment functions, there will be consideration for supporting the development ofdomestic venture capital firms, such as by establishing investment quotas that are limited to47

venture capital firms run by young capitalists, and for reviewing the upper limit of debt
guarantee systems for deep tech startups.
2) Strengthen investment functions of the Japan Investment Corporation
With regard to the Japan Investment Corporation (JIC), a new 200-billion-yen scale fundhas been established and will be utilized. Its investment functions will also be strengthened
through the submission of a bill around next year to extend its investment mandate to 2050
(currently until 2034).
Furthermore, we aim to establish a 40-billion-yen scale fund within this year, which will
include direct secondary (investment carried out by way of transfer from investors who holdissued shares, etc. to venture capital firms or other investors) and the supply of growth funds
to listed startups.
3) Strengthen the investment functions of public-private funds, etc.
Limited liability investments in domestic and overseas venture capital firms by public funds
will be strengthened, including for public and private funds other than those by SME
SUPPORT JAPAN and JIC, and there will be sufficient risk money supplied to realize a 10x
or greater increase in startup investment in five years.
For this reason, the amount of limited liability investment in domestic and overseas venture
capital firms by various public and private funds will be aggregated and published every year.
When doing so, attention will be given to the supply of risk money to bring about therealization of an investment amount “which is 10 times the scale of the current fund after five
years.”
With regard to public and private funds, efforts will be made to strengthen investment
functions in overseas hub functions and overseas venture capital firms, while cooperating with
NEDO and JETRO. In doing so, gatekeepers (advisors) such as private financial institutions
that have assessment abilities and networks with domestic and overseas venture capital firms
will be actively utilized.
Additionally, collaborations between government-affiliated startup support organizations
will have their unified information dissemination strengthened and their effectiveness as
central points of contact will be enhanced. Further utilization of the Special Investment
Operations of the Development Bank of Japan (DBJ) will be promoted.
4) Strengthen support measures for R&D startups by NEDONEDO has been providing subsidies for two-thirds of the amount equivalent to the cost ofpractical application development, on the condition that one-third of this amount is invested
by certified venture capital firms. Going forward, it will enhance support measures for R&D
startups by utilizing a 100-billion-yen fund over a five-year period, increasing the upper limitof this subsidy, expanding the support menu, and increasing the number of eligible venture
capital firms including overseas venture capital firms. In doing so, efforts will also be made tosimplify the procedures in consideration of the burden on startups.
Furthermore, in order to accelerate the business expansion of deep tech startups in thegrowth stages and promote the formation of ecosystems, NEDO will expand support programsfor deep tech startups, including its support toward mass production and business development.
5) Enhance support for drug discovery startups by AMED
AMED has been providing subsidies for two-thirds of the amount equivalent to the cost ofpractical application development, on the condition that one-third of the amount is invested bycertified venture capital firms and with support eligibility limited to infectious diseases for48

drug discovery startups. Going forward, it will enhance support for drug discovery startups byutilizing a 300-billion-yen fund spread out across 10 years, and by expanding support
eligibility to drug discovery fields other than infectious diseases and which face difficult inraising funds. In doing so, efforts will also be made to simplify the procedures in considerationof the burden on startups.
6) Radically strengthen the SBIR system and funding to R&D startups
Since there is no basic policy that provides guidance on how to fund R&D startups,
including startups launched from universities and colleges of technology (KOSEN), startups
in the seed phase (the stage before receiving investments from venture capitals, etc.) are unable
to cross the “Valley of Death.” There are also many points of contention associated withfunding agencies (rate of subsidy, application format, accounting processes, etc.)
In light of this situation, a “Guideline on Funding R&D Startups” that sets out elements suchas the strengthening of support from funding agencies (JST, NEDO, AMED, etc.),
implementation method, subsidy rate and financial sources, data collection and evaluation
analysis, will be formulated at an early stage and adopted for the programs of the respective
funding agencies with effect from this fiscal year and next fiscal year.
To date, under the Small/Startup Business Innovation Research (SBIR) program, a total of
7 billion yen in R&D-related subsidies from the various ministries has been combined tosupport R&D in the FS survey phase for business ideas ("Phase 1") and in the R&D phase forcommercialization ("Phase 2"). Together with expanding these subsidies, the large-scaletechnology development and demonstration phase ("Phase 3") will also be newly added as abeneficiary of this support program, and a 200-billion-yen fund spread over five years (40billion yen per year), newly created through the Cabinet Office, will be utilized to provide
backup for Phase 3.
The program will also be revised as necessary to ensure that research funds reach startups
during their seed stage, in a way that places little burden on both the funding agency and thestartup.
7) Strengthen connections with advanced overseas ecosystems
In Boston, the evolution of the startup creation and nurturing model has led to the early exitof biotech startups. The connections between these world's most advanced ecosystems and theecosystem of drug discovery startups in Japan will be strengthened.
8) Measures to encourage investment in startups
We will utilize the preferential tax system established under the FY2023 tax reforms forreinvestment in a startup by using sales of shares, and promote the supply of funds to startups
from individuals such as founders.
In order to promote angel investment, the spread of platforms for information sharing andmatching between angel investors and startups will be promoted.
9) Promote investments from individuals to venture capital firms
Under Venture Capital Trusts (VCT) in the UK, tax incentives (such as tax deductions at
the time of investment, tax exemptions for investment profits, and tax exemptions from
corporate tax) are granted for investments by individuals in listed venture funds, and about 1
trillion yen of individual funds are invested in VCT per year. In view of the nature of longterm investments from VCT to early-stage unlisted companies, consideration is also given toliquidity (system of redemption from VCT) and information disclosure (quarterly).
While using such examples as reference and paying close attention to protection investors,

49

we will consider implementing a scheme (Japanese version of the VCT) to promote
investments by individuals in listed venture funds.
Specifically, considering that tax deductions at the time of investment is one of the greatest
success factors in case studies of the UK and France, we will consider the necessary measures,such as angel tax systems, for introducing tax deductions at the time of investment forinvestments by individuals in venture capital firms, including making listed venture funds
eligible for preferential tax systems. In doing so, we will also consider making investmentsfrom trusts eligible for angel tax systems.
In the UK, in line with the nature of long-term investment, the self-acquisition of investment
equity is possible from the viewpoint of securing liquidity. In view of this, we will consider
revising the Cabinet Office Ordinance on the Act on Investment Trusts and Investment
Corporations, etc., alongside fraud prevention measures, to enable the self-acquisition of
investment equity in listed venture funds in Japan as well. Furthermore, from the viewpointof fundamentally reforming the asset management industry in Japan, we will also takereference from the examples of other countries and take early steps to revise the framework
for investment trusts, in order to further increase the lineup of investment trust products thatare suitable for long-term investment.
Looking at the case of the UK, information disclosure is required every quarterly. In lightof this, based on the premise that companies should disclose important information in a timely
fashion for investors to base their investment decisions on, we will consider revising the rules
for companies listed under the Tokyo Stock Exchange to disclose information on a quarterly
basis, rather than on a weekly or monthly basis, for listed venture funds in Japan.
10) Improve environment for the use of equity investment crowdfunding
Equity investment crowdfunding is a mechanism in which unlisted companies issue sharesto raise funds in small amounts from many people through the Internet. We will consider
raising the current ceiling on the total amount of issuance (100 million yen) to 500 million yen,for example, alongside the necessary measures to protect investors, such as information
disclosure, while taking reference from the examples of other countries such as the U.S. With
regard to the investment limit for investors, we will also consider setting the investment limit
corresponding to the investor’s annual income or assets, making it possible to invest 1 million
yen from the current investment limit of 500,000 yen, for example. We aim to reach aconclusion on these reviews by the end of next year.
11) Promote public procurement
Utilizing public procurement is also important for developing startups.
Procurement from startups will be expanded in areas where the ratio of contracts from small
and medium-sized enterprises (SMEs) established less than 10 years is only about 1% forproperties, construction, and services procured by the national government, independentadministrative agencies, and other government agencies, and the contract ratio will be rapidly
expanded to 3% or more (to approximately 300 billion yen).
Additionally, the use of Startups (including the use of those selected as J-startups) will bepromoted in a wide range of government procurement, including for public infrastructure(railways, electricity, and water).
In order to expand the participation of startups in government procurement, a bidding
participation qualification system will be considering, including consideration of rules on freecontracts and measures that grant additional points for large-scale national research.
Public procurement by local governments will be promoted comprehensively throughmeans such as reviewing the documents required and criteria for participating in procurement50that vary among each local government, visualization of the public procurement situation by
the government, and early introduction of a digital marketplace.
12) Consideration of SPAC (Special Purpose Acquisition Companies)
Consideration will be given to the necessary systems should SPAC (Special Purpose
Acquisition Companies) be introduced, taking into account trends in international financial
markets and giving due consideration to investor protection.
13) Improve the trading environment for unlisted stocks
Currently, Proprietary Trading Systems (PTSs) operated by securities companies are notpermitted to handle unlisted stocks even for professional investors. In order to enable thehandling of unlisted stocks for professional investors so that startups can grow without being
listed, the relevant Cabinet Orders for the Financial Instruments and Exchange Act will berevised during this fiscal year.
Additionally, with regard to online transactions in the secondary market, we will develop
an environment as soon as possible to facilitate participation by online platformers while
giving consideration to protecting individual investors. Aspects of this environment include
easing of approval criteria such as capital requirements (currently 300 million yen) in
Proprietary Trading Systems (PTSs), easing of disclosure obligations, easing of system
requirements, etc.
To promote the supply of funds to startups in the primary market, we will consider theapproach to financing, including the approach to small amount public offerings, while securing
appropriate investment decisions and preventing investment scams by ensuring appropriate
disclosures and information provision, as well as appropriate solicitation.
14) Review the private placement system for professional investors, etc.
The Japan Securities Dealers Association (JSDA) revised its rules regarding the private
placement system for professional investors, which allows startups to solicit applications toacquire newly issued securities, from professional investors only, as a means of raising funds,
and made the system available for unlisted securities as well. On the other hand, it has been
pointed out that there is a heavy administrative burden on startups for the specified securities
information (corporate information and business performance, etc.) that is required to beprovided or disclosed under the new system. In view of this, while following up on theutilization status of the new system and taking into consideration actual needs and theviewpoint of investor protection, we will take reference from case studies in various countries
and promote the use of private placement system for specific investors, toward expanding
trading in the primary market. We will also review the approach to funding, such as the way a
private placement system for small groups of people works (restrictions on the number ofpeople, changes to the method for calculating the number of investors, etc.), and the system
for the securities registration statement that gives consideration to the characteristics of astartup.
15) Tax measures related to the departure tax, etc. to promote overseas expansion
In order to promote the overseas expansion of startups, when a startup is expanding overseas
and when a manager himself/herself will be posted overseas, it should be confirmed and madeknown that it is possible for the manager to leave Japan with the company's guarantee andwithout the manager having to provide his/her own startup shares as collateral. In the sameway, inform employees, etc., that they do not require to offer their share certificates as
collateral if they pledge their shares as well.

5116) Redirecting personal financial assets and long-term investment funds such as GPIF toventure investment.
In addition to redirecting personal financial assets in Japan toward nurturing startups,
pathways will be developed to redirect long-term investment funds such as Government
Pension Investment Fund (GPIF) to venture investment and infrastructure provision.
For this reason, Doubling Asset-based Income Plan will be promoted in order to redirect
personal financial assets to nurture startups by promoting venture investments from angel
investors and by investing in domestic venture funds from pension funds.
Additionally, from the perspective of benefits for the insured, etc., such as sustainablegrowth of the overall market and risk reductions and performance improvements throughdiversified investments, public institutional investors such as GPIF will work to develop an
environment for expanding the supply of funds to domestic startups, which are growth engines,
through investments in domestic venture funds.
17) Promote startup financing by banks, etc.
As for supply of funds to startups through loans, we will flexibly follow up on the state ofsupport for startups while also monitoring banks, etc. based on The JFSA Strategic Priorities,
etc.
Bearing in mind startups that require time to grow, and from the perspective of providing awide range of support for the development of new business domains, we will promote therelaxation of requirements for investment regulations, in order to expand the scope of startups
that banking groups can invest in.
In addition to the above, we will also improve the environment for encouraging banks tofinance startups, such as by making financial businesses (fintech companies related to fundsettlement, etc.) eligible for financing upon screening to ascertain that they pose no subleasing
risks under the Japan Finance Corporation’s startup support system.
We will promote the establishment of funds by financial institutions and investment instartups by regional financial institutions. With regard to continuous investment in startups
by banks, we will clarify and publicize the fact that such investments are not subjected torestrictions as speculative unlisted shares.
18) Improve the environment to attract overseas investors and venture capital firms
Unlisted shares held by funds are valued at fair value (market value) overseas, but are often
valued at acquisition cost in Japan. To enable the international comparison of the performanceof Japanese venture capital firms, and to attract overseas investors, we will clarify the points
to note in auditing venture capital firms and the practical handling of accounting procedures,and promote the adoption of fair value assessment and implementation of audits, etc. in Japan.
Specifically, in order to promote fair value evaluation in investment limited partnership(LPS), we aim to revise the LPS accounting rules and stipulate fair value assessment by thissummer. In addition, while the Japanese Institute of Certified Public Accountants has recently
revised its practical guidelines for the accounting and auditing of financial instruments related
to LPS, there are expectations of further revisions to the provisions on accounting standards
for financial instruments where necessary.
Currently, LPS are not allowed to invest an amount that is 50% or more of the total capital
contribution of all partners without obtaining certificate. We will revise the Limited
Partnership Act for Investment (the LPS Act) and abolish the upper limit on overseas
investment under the LPS Act. Additionally, from the perspective of more thoroughinformation disclosure associated with the expansion of the business scope of LPS, we will52

consider stipulate the matters that should be contained in financial statements, etc. in laws andordinances, with a view to legal reforms in the next fiscal year.
It has been pointed out that Japanese contract formats, etc. sometimes become a barrier toentry for overseas investors, or that venture managers and employees are sometimes unable tooperate under the same conditions as they do overseas due to tax systems and labor laws. While
taking into consideration the actual situation of the business practices of overseas investors,
we will revise and publicize written model format for a Limited Partnership Agreement in linewith global standards.
19) Strengthen the creation of regional startups
In addition to the Startup City Project Japan and J-Startup initiatives, we will increasefinancing from national universities to regional funds that regional financial institutions
participate in, and boost startup support from regional universities.
20) Support startup creation in Fukushima
Efforts will be made to develop demonstration fields in the Hamadori area, Fukushima
Prefecture, to facilitate the implementation of demonstrations, such as robots, drones, andeVTOLs, in an environment that is nearer to the sites of actual use.
21) Utilization of startups at Expo 2025 Osaka, Kansai, JapanAt the Expo 2025 Osaka, Kansai, Japan, branded as “People’s Living Lab,” technologies
from startups will be actively utilized. To realize the global expansion of activities undertaken
at the respective startup ecosystem hubs, efforts will be made to strengthen the necessary
measures for the development of the ecosystem in relation to the theme of the Expo,“Designing Future Society for Our Lives.” These include holding international conferences
and business contests based on themes such as zero carbon and healthcare, entrepreneurshipeducation, and global acceleration programs.
22) Review the treatment of personal information in securities registration statements andregistration of a company
The names, addresses, and other personal information of those who hold stock options are
set out in the securities registration statements submitted for an initial public offering, as wellas other documents. The treatment of personal information will be reviewed within this fiscal
year. In addition, the address of the representative director is recorded in the company registerduring the registration of a company and thereby becomes public information. This will
similarly be reviewed within this year.
23) Enhance the convenience of tax systems for overseas investors
Under the FY2021 tax reforms, when overseas investors invest in a Japanese fund throughan overseas fund, it will not be subject to income tax as business income in Japan if the equity
held by the individual investor unit is less than 25%, even if the equity held by the overseas
fund in question is 25% or more. Upon an investigation into the effects of this reform, a review
will be conducted on how the tax system works and other matters, with a view to enhance
convenience in promoting investment from overseas limited partners (LP) to domestic generalpartners (GP).
24) How the Tokyo Stock Exchange’s Growth Market should work
As the Tokyo Stock Exchange advances market reforms and works on developing anenvironment for improving corporate value, we will conduct a review on developing systems

53

for the growth market, such as the approach to listing maintenance standards, including the
introduction of indicators related to growth potential. At the same time, we will tightendelisting requirements.
Furthermore, to improve the environment for enabling drug discovery startups to procure
funds continuously even after they are listed, the management of the drug discovery pipelines
in the clinical trial phase and alliances with large pharmaceutical companies, regarding the
drug discovery pipelines, which are set out as examples in the Tokyo Stock Exchange's New
Listing Guidebook and is a substantial requirement for IPO, will be rationalized through therevision or rewriting of such examples.
25) Strengthen cooperation with ASEAN countries and others
With regard to support for partnerships and collaborations between companies to solve
social issues in ASEAN countries, comprehensive one-stop support will be provided in linewith the corporation’s phase.
Through the convention of the ASEAN-Japan Young Business Leaders' Summit andGeneration Z Business Leaders’ Summit, comprising potential next-generation leaders activein Japan and ASEAN, efforts will be made to build a Japan-ASEAN entrepreneurs’ network.
With regard to cooperation with ASEAN and other countries, which was also discussed at
the G7 Summit, support will be given to startups engaged in overseas business development
in cooperation with local companies.
(6) Promoting open innovation
An early argument for disruptive innovation was that companies using old technology will
inevitably lose out to companies that enter the market using new technology. However, recent
studies have found that even companies using old technology can survive sustainably if they
introduce new technology in cooperation with startups. The following measures will be
implemented to promote open innovation.
1) Tax measures, etc. to promote open innovation
To promote M&A by business firms, which provides an exit strategy for startups, while
only newly issued shares had previously been eligible for tax incentives to promote open
innovation, existing issued shares in acquisitions of 500 million yen or more have also been
included in cases where they contribute to startup growth. To continuously promote open
innovation by existing companies and startups, we will consider extending the applicable
period of the tax incentives to promote open innovation, alongside other measures.
In addition, while taking reference from case studies in other countries, we will consider
measures to promote investment by business firms in venture capital firms from theperspective of expanding the funding scale of independent venture capital firms with expertisein deep tech.
2) Improve the working environment in startups
To increase the capability of startups to secure human resources, we will create work
environment to address issues faced by startups through not only monetary incentives, but alsomeasures such as establishing a health insurance association in which startups can participate.
In addition, by utilizing support measures for companies that dispatch human resources toside jobs and companies that accept human resources employed in positions as a side job, wewill encourage side jobs and side businesses as a starting point for facilitating smooth labor
movement into growth fields.
To enable intellectual property support to reach startups that need intellectual property

54

support via venture capital firms, we will expand the scale of the dispatch of intellectual
property experts to venture capital firms.
3) Consider further accelerating organizational restructuring
In order to enable management resources (human resources, technology, etc.) of large
companies to fulfill their potential, and to create startups launched from large companies, even
if a part of the equity is left in the company that creates a spinoff, it will not be subject totaxation.
Furthermore, in order to support innovation by enhancing the fluidity of excellent
technology and human resources that exist in business firms, etc., we will consider measures
to promote bold business restructuring, in addition to providing strong support for R&D
activities to business firms, etc. engaged in commercialization through the utilization of
external management resources in cooperation with venture capitals, etc., as well as to those
who are engaged in carving out businesses.
4) Expand the voluntary application of International Financial Reporting Standards (IFRS) to
promote M&A
Japan’s accounting standards stipulate the routine amortization of goodwill through thestraight-line method. Some have pointed out that the amortization of goodwill continuously
puts pressure on the earnings of acquired companies. For this reason, we will promote thevoluntary application of international financial reporting standards (IFRS), under which
goodwill is not amortized, by companies.
5) Approach to information disclosure on the results of M&A
We will consider measures to facilitate better understanding among investors on the resultsof M&A, such as disclosing profits adjusted for goodwill amortization (adjusted EBITDA
basis) in financial statements.
6) Collect and organize data to obtain an overview of the startup ecosystem
We will work on collecting and organizing data to enable international comparisons, suchas by conducting fact-finding surveys.
7) Promote the openness of data related to public services and infrastructure
National and local governments will provide information on public data on the Internet thatcan be used by startups, etc.
8) Strengthen the networks of large companies and startups
In order to promote smooth open innovation, awareness will be spread about "guidelines"that should be kept in mind regarding non-disclosure agreements and license agreements, etc.
for when startups and business companies, etc. collaborate.
3. Comprehensive support measures and facilitating the exit, including businessrestructuring and business succession, etc. in the case of a business slump
The Organisation for Economic Co-operation and Development (OECD) evaluates thecurrent situation in each country concerning the ease of recovery from business revitalization
or bankruptcy among corporate managers in developed countries. According to theirevaluation, Japan, compared to other developed countries, is assessed to face recovery
difficulties, and the appraisal of the presence or absence of early diagnosis and rehabilitation
procedures in Japan is particularly poor. 14
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Looking at the financial results of closed and dissolved companies just before their closure
or dissolution in Japan, the percentage of companies with profits is falling every year, fallingto over 50% recently. Conversely, the percentage of companies registering losses is on the riseand exceeds 40%. 15
It is also important to consider measures to facilitate exit, such as building early consultation
systems if corporate managers wish to exit.
(1) Establishing early consultation systems and other institutional arrangements when
corporate managers wish to exit
According to surveys conducted by the Financial Services Agency, when withdrawing fromor dissolving an unprofitable business, many managers feel anxious and worried about the costof business withdrawal/dissolution, the size of debts incurred by the business to date, life after
dissolution of the business, and other aspects.
On the other hand, many companies without successors consult with their consulting tax
accountants about business continuity, while only 3.8% consult with supporting agencies for
SMEs (Support Centers for Smooth Business Succession, Yorozu Support Centers). Yorozu
Support Centers, established in all prefectures across Japan, serve as the comprehensive liaison
office for supporting SMEs, but consultations about business succession and cessation ofbusiness make up only 1.8% of all consultations. 16
For this reason, we will build systems that enable corporate managers to consult, from anearly stage, with experts on a wide range of options when their businesses are not doing well,such as M&A, business restructuring, business succession, and dissolution. This includes
improving the systems of supporting agencies for SMEs nationwide. At the same time, we willraise awareness among corporate managers on the importance of consulting early. Alongsidewith these, we will also consider extending and expanding tax systems for business successionthat involve entrusting management to relatives.
(2) Developing legal systems for business restructuring
During the COVID-19 pandemic, the outstanding obligations of Japanese corporations
continued to increase, with 16% of large companies and 33% of SMEs responding that they
have perceived excessive debt. 17 Of the companies that responded that they have perceived
excessive debt, 31% of large companies and 35% of SMEs (as of October last year) feel thatdebt hinders business restructuring. 18 When asked about the points that they place importanceon when considering private liquidation of debts for business restructuring purposes, thelargest number of respondents (more than 70%) selected "procedures that do not impact on
current business/transactions," and more than 40% selected "procedures are simple and do nottake a long time." 19 In developed countries, in addition to insolvency proceedings, there islegislation in place to enable the reduction of financial debts through a majority vote forbusiness restructuring with the approval of the court, without requiring the consent of alllenders. 20 Such systems address the problem described above, but they do not exist in Japan.
Legislation on business restructuring should be improved in Japan, in similar forms as inother developed countries, to make it easier for companies to reduce financial debts through amajority vote without requiring the consent of all lenders. The bill for such legislation will be
submitted to the Diet as soon as possible.
(3) Financing that focuses on companies' business feasibility
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80% of people who are interested in starting a business cited personal guarantees as a riskin the event of failure. Although the percentage of loans with a personal guarantee provided
by business owners is gradually declining, 70% of new loans from private financial institutions
still come with a personal guarantee provided by business owners. 21
Additionally, according to a questionnaire survey of SME managers, nearly half pointed outthat the negative impact of a personal guarantee provided by business owners on management
would delay the early start of business revitalization. 22 As such, in order to start business
revitalization at an early stage, it is necessary to establish and popularize financing options
other than loans that rely on personal guarantees provided by business owners and tangible
assets such as real estate such as collateral. First, we will make thorough use of the Guidelines
for Personal Guarantee Provided by Business Owners, and will continue to aim to reduce, asa percentage of new loans, the number of loans with a personal guarantee provided by businessowners. In addition, we will consider a legal system that allows companies to raise funds bycollateralizing their entire business’ asset, including intellectual property and intangible assets
such as the company's know-how and customer base, and will aim to submit legislation forthis system as soon as possible.
In order to establish lending practices that do not rely on personal guarantees provided bybusiness owners, we will promote the use of a new credit guarantee system that does not
require personal guarantees for startups that are less than five years old. Furthermore, by next
spring, we will create a credit guarantee system that provides managers with the option ofcancelling personal guarantees provided by business owners by paying an additional guarantee
fee if the business satisfies requirements that can be achieved depending on the manager's
efforts.
As for loans provided by the Japan Finance Corporation, we will promote the application of
newly established lending requirements that do not require a personal guarantee provided bybusiness owner for startups within five years of their establishment. In conjunction with this,we will promote the use of capital loans for startups with insufficient cashflow and for SMEs
whose financial situation has temporarily deteriorated.
With regard to startups, we will work to improve financial institutions' screening systems inorder to increase the supply of startup financing (venture debt) to startups that lack assets thatcan be used as collateral. Additionally, in order to enable companies to finance in a variety ofways, we will work to revitalize the trading of unlisted stocks by studying the disclosure
content that is required for small-amount offerings, investment limits that take into
consideration investor protection in stock investment-style crowdfunding, and the relaxationof requirements for Proprietary Trading Systems (PTSs) that handle unlisted stocks for
professional investors. We will also promote the utilization of middle-risk/middle-return
financing methods through bonds, and we revitalize the secondary market for bonds and makeit more liquid (making it off of balance sheets).

Ⅵ. Building Economic and Social Systems for Solving Social Issues
It is no longer viable to focus on short-term increases in corporate profits. Companies must
fulfill their social and environmental responsibilities (human capital and human rights, climatechange, diversity, etc.) to maintain businesses' sustainability. By a shift from a perspective that
focuses on the short-term profitability of individual companies to one that emphasizes social
value, and considering social and environmental impacts in addition to financial risk/return,
we will incorporate external diseconomies into capitalism and promote a multi-stakeholder
corporate society.
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In Japan, which is said to be a challenge-developed country, we will build systems into theeconomy and society in order to solve social problems.
1. Comprehensive support measures for impact startups
As for services that have been handled by the public sector up until now, it is expected thatthe private sector will be proactively involved in order to respond to diverse needs in a detailed
manner. In Japan which is said to be a developed country facing challenges, it is important totake the lead in the world in recognizing social issues as energy for growth, and to build
systems into the economy and society to resolve them.
When people consider establishing a startup, their purpose is often to solve social issues
such as environmental problems or problems with child-rearing. In fact, Japanese startups'
primary motivation for being founding is "Want to solve social issues and be useful tosociety" 23 (answer by 73% of respondents in the Startup Survey 2022).
To this end, comprehensive support measures, including the creation of a new certification
system for impact startups (social entrepreneurs) and a financial framework, will be promoted
as follows.
1) Creation of a framework for strengthening collaboration among stakeholders such as impact
startups, NPOs, relevant departments in existing companies, and investors
A framework will be established to strengthen collaboration stakeholders, including impact
startups, NPOs, and relevant departments in existing companies. In order to support the studyof impact measurement methods, the development of data, and investment for utilizing them,with the participation of investors and companies, a consortium will be established to promote
data development and human resources development related to business evaluation.
2) Creation of impact investment projects
From the perspective of deepening the understanding of those involved in impact investment(investment that aims not only to obtain economic benefits but also to solve social issues) andto promote the spread of impact investment, basic guidelines will be compiled during thecurrent fiscal year. Based on these guidelines, we will promote the creation of impact
investment projects, including investment in impact startups, through collaboration with theDevelopment Bank of Japan and local governments.
3) Educational programs related to impact startups
We will support the creation of educational bases for fostering social entrepreneurs and theoverseas dispatch of young human resources who aspire to become social entrepreneurs. In
doing so, we will also provide financial support for the development of curriculums atdomestic universities and for the creation of networks for potential social entrepreneurs.
4) Consideration of a certification system and new corporate form for impact startups
Based on international certifications, we will launch an impact startup version of J-startup(a support and development program for startups) at an early stage as a framework for thecertification of Japanese impact startups.
Preferential treatment in public procurement will be introduced for companies that are
certified under the above certification system. In addition, through the use of Social Impact
Bonds, measures will be taken to encourage and promote the participation of impact startups
in public procurement by local governments.
Together with this, we will refer to the examples of other countries such as the United States
and will study a new system of legal entities that are in the private sector but that play a public
58role.
5) Creation of lists of recommended companies and matching with local governments
Local governments will be provided with information about impact startups as well as acollection of good examples of initiatives between impact startups and local governments.
Additionally, there will be a unification of the formats, such as the procedures and information,
which are required by local governments when impact startup services are introduced.
6) Support measures for investment
Because the realization of social benefits needs to be viewed on a long-term time horizon,
impact indicators will be concretely formulated with a view toward establishing long-term
funds and developing secondary market systems.
Systems such as programs that dispatch experts to impact startups will be considered for the
purpose of receiving investment from impact investment funds, etc.
Vehicles that connect individual investors and impact startups will be established at an earlystage, such as an investment trust framework that incorporates unlisted stocks.
7) Utilization of the hometown tax payments (furusato nozei) and the corporate version of thehometown tax payments
In order to support the development of impact startups, we will increase utilization of boththe individual and corporate versions of the hometown tax payments system (furusato nozei),
and we will also strengthen the collection and dissemination of information on good practices.
8) Utilization of dormant deposits
In accordance with the review of the dormant deposit system five years after it wasestablished, through projects that make use of dormant deposits we will enable and promote
investment in impact startups that are in their founding stage.
9) Promotion of Pay For Success by national and local governments
In order to promote the use of Pay For Success contracting system, etc. to resolve social
issues, we will promote the use of Social Impact Bonds, etc. that raise funds from the private
sector.
10) Expanding the flow of highly donor-oriented funds through public interest corporations
In order to expand the flow of highly donor-oriented funds from the wealthy to impact
startups, we will promote "investments" and "subsidies" in impact startups by public interest
corporations. To this end, we will review change approval procedures so that public interest
corporations can flexibly and quickly change projects, and, at the same time, in order topromote the use of public trusts, the requirements for trustees to receive tax benefits will be
relaxed to allow impact startups to participate as well.
11) Establishment of one-stop contact point
One-stop contact points will be established so that impact startups can understand thatvarious measures that are available for them to use, and support systems will be strengthened.
2. Support for NPOs and public interest corporations that solve social issues
1) Reforms for public interest corporations
In order to promote the resolution of social issues by public interest corporations, fiscal

59

discipline will be made clearer and more flexible, administrative procedures will be
streamlined and simplified, corporate transparency will be increased, and autonomous
governance will be enhanced, such as through a review of the income/expenditurescompensation principle (income amounts must not exceed compensation amounts forreasonable expenses that are required to conduct the business public interest purposes) andidle asset regulations (idle assets that have no definite use may not be held for more than theequivalent of one year's worth of expenses for public interest projects).
As for the public interest trust system, authorization and supervision by the competent
government agencies will be abolished, and a mechanism will be established to authorize andsupervise public interest trust through a common framework with the Act on Authorization of
Public Interest Incorporated Associations and Public Interest Incorporated Foundation.
To this end, we will strive to submit the necessary bills to the ordinary session of the Diet
next year and to improve the system.
2) NPOs working to solve local issues
In order to raise awareness of the government's support measures for NPOs and others
working to solve local social issues, we will utilize public-private partnership platforms, etc.
and conduct push-type dissemination and publicity activities.
3) NPOs working on measures for loneliness and isolation
In order to provide detailed support for the activities of NPOs and other organizations thatare working on measures for loneliness and isolation, based on the Act on Promotion of Policy
for Loneliness and Isolation, we will strengthen development of human resources to provide
counseling and support, establish The Headquarters for Promotion of Measures for Lonelinessand Isolation in the Cabinet Office as well as local councils in each local government, andstrengthen the support systems of the public and private sectors.
4) Human resources matching projects in rural areas and cities
By promoting human resources matching projects in rural areas and cities, we will develop
and utilize human resources in local areas and promote the circulation of human resources tolocal areas.
3. Strengthening advocacy functions of the competition authority
In addition to enforcing the Antimonopoly Act, the competition authority also inquires areas
where competition is lacking due to trade practices or regulations and advocates improvementsin these practices or reviews of regulations.
Focusing on fields where the market is rapidly changing, such as green and digital fields,
the competition authority will promote new fact-finding surveys and demonstrate theiradvocacy functions. In order to swiftly ascertain the actual status of transactions in these fields,
we will promote the appointment of human resources with expertise in cloud computing,information technology, information security, economic analysis, etc. to the Japan Fair Trade
Commission.
4. Strengthening concessions (including PPP/PFI)
Concessions for public facilities managed by private operators (public facility, etc. operating
project) will be strengthened.
For airports, we will study how the public and private sectors should share risks in the eventof costs and damages caused by force majeure such as COVID-19, and specific policies for60three airports will be decided by FY2026. At Haneda and Narita airports, we will also move
forward with coordinating with the local communities to utilize and expand airport capacity.
By FY2026, specific policies will be determined for 7 public transportation terminals “Busta”
and 10 stadiums/arenas. For stadiums/arenas, local governments' study from the conceptual
introduction stage will be supported. Additionally, the formation of models for familiar
facilities such as parks and community centers will be supported.
In the forestry sector, we will proceed with selecting candidate sites to establish new Timber
Harvesting Rights. In doing so, market research and information gathering (market sounding)for project formation will be constantly conducted, the rights period (10 years in principle)
will be flexible, and the multiple and simultaneous designation of extraction areas will behandled.

Ⅶ . Doubling Asset-Based Income Plan and the Formation of a Broader
Middle Class

With the aim of increasing the sophistication of asset management necessary for therealization of middle class asset formation, and while promoting a shift among households
from savings to investment, we will realize higher and more stable investment returns forhouseholds and improve corporate value via drastic reforms in the asset management industry
and via corporate governance reforms, etc.
1. Promotion of the Doubling Asset-based Income Plan
(1) Basic concept
Looking at the "new form of capitalism" in terms of the flow of funds, we will use the 325
trillion yen in cash and deposits accumulated in the corporate sector to invest in importantfields such as human resources, startups, GX and DX, thereby boosting growth. It is also
important to use the cash and deposits that lie dormant in the accounts of Japan's households
for investment, and to increase household income from financial assets in addition to working
income.
More than half of Japan's 2,000 trillion yen in household financial assets of are held in cash
and low-yielding deposits. 24 Even after accounting for pensions, insurance and other indirect
holdings, the total amount invested in stocks, investment trusts and bonds are 244 trillion yen,with only about 20 million investors.
On the other hand, in the United States and the United Kingdom, an environment has beencreated in which even the middle class can easily invest in listed stocks and investment trusts.
Household financial assets have increased 3.4 times in the United States and 2.3 times in the
United Kingdom over the last 20 years, but only 1.4 times in Japan due to differences in theinvestment environment.
Cash and deposits account for a larger proportion of household financial assets in Japan thanin Western countries, which is due in part to the post-war development of indirect financing,in which companies borrow from financial institutions such as banks. Realizing a shift fromsavings to investment and promoting a shift to direct finance are also important in developinga startup ecosystem that raises funds from venture capital, while also ensuring a steady supplyof risk money that supports corporate growth.
If we can create an environment in which the middle class can easily invest in high returnassets, we will be able to increase household income from financial assets. Furthermore, ifhousehold funds become a source of funding for corporate growth investment, it would

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stimulate corporate growth and increase corporate value. If corporate value rises, householdincome from financial assets will increase further, resulting in a "virtuous cycle of growth andasset-based income."
Digitalization has made it possible to easily manage assets using apps and access a wide
range of financial products with low fees, allowing the development of a system that allows adiverse range of people, including those with little investment experience, to participate inasset formation, thereby greatly expanding the middle class’s asset-based income.
(2) Goals
The Doubling Asset-based Income Plan formulated last November, set its goals as follows.
First, we aim to double the number of people with investment experience. Specifically, we
aim to double the total number of NISA accounts (ordinary and installment-type accounts)
from the current 17 million to 34 million in five years. 25
Second, we aim to double investment. Specifically, we will double the amount of NISA
account purchases from the current 28 trillion yen to 56 trillion yen in five years. Following
that, we aim to double the investment amount (total balance of stocks, investment trusts, bonds,etc.) among households.
In order to realize stable asset formation primarily for the stratum centered on the middle
class through achieving these goals, we will implement policy measures with a view todoubling asset-based income itself as a long-term goal.
(3) NISA system
1) Major expansion of and making permanent NISANISA (Nippon Individual Savings Account, tax exemption program for small investment),
launched in 2014, is becoming an established entry point for asset formation for the stratum
centered on the middle class in particular. On the other hand, the utilization rate of NISA is20%, leaving much room to promote greater utilization.
From the perspective of promoting stable asset formation, it is necessary to make it possible
to predict financial asset formation using NISA by implementing NISA as a stable system thatlasts into the future. Taking this step will make it possible to encourage continuous investment.
Furthermore, in the short term, investment yields may fluctuate, but when averaged over thelong term, investment has a significant effect on asset formation. Until now, the existence of adeadline for a tax exemption period means that if unrealized gains or losses occur in the shortterm, rather than waiting for the investment price to rise in the long term, the gains and losses
get recognized in the short term. Such a system has made it difficult to create incentives tocontinue holding an investment over the long term.
As such, the NISA system was made permanent to enable people to continuously build
assets through long-term, installment-type, and diversified investments from their youth to oldage. In conjunction with this change, the NISA system was consolidated into a single
investment framework that takes over the functions of installment-type NISA accounts and thefunctions of ordinary NISA accounts so that both can be used together. In addition, the upper
limits for tax-free investment in NISA were raised from 1.2 million yen for the ordinary NISA
and 400,000 yen for the installment-type NISA to 2.4 million yen for Growth Investment and1.2 million yen for Installment-type Investment, for a total investment amount of 3.6 million
yen.
In addition, the tax-exempt holding period was made indefinite. The tax-exempt holding
limits were previously set at ¥6 million for the ordinary NISA and ¥8 million for the
installment-type NISA, but a lifetime upper limit was set at ¥18 million for Installment-type
Investment and at ¥12 million for Growth Investment.
622) Simplification of NISA procedures
In order to make it easier for users, including those with no investment experience, to use
NISA, and to reduce the burden on financial institutions that provide services and service users,
we will utilize digital technology to simplify and rationalize procedures related to NISA.
Furthermore, working with the Digital Agency, we will consider simplifying the opening of
NISA and iDeCo accounts, including the use of Individual Number Card (My Number Card).
3) Actions to be taken for the launch of the new NISA system
In preparation for the launch of the new NISA System (January 2024), a management system
for tax-exempt holding limits will be developed, and publicity activities will be strengthened
to inform the 80 million people with no investment experience about the NISA system and to
arouse their interest in asset formation. We will also consider using Individual Number Card
(My Number Card) for periodic confirmation procedures for users of the system.
(4) iDeCo system
1) Reform of the iDeCo system
iDeCo (individual-type Defined Contribution pension plan), which is a pension plan systemthat allows individuals to participate in the plan and determine by themselves how much tocontribute and how to manage the contributions, is used mainly by the stratum centered on the
middle class and contributes to increase their household income.
In light of the fact that the obligation to make efforts to secure employment opportunities
for the elderly was extended to the age of 70, and that workstyles and lifestyles are becoming
more diverse, it is necessary to further improve the environment for household asset formationin advance of reaching old age. Therefore, we will reform the iDeCo system.
2) Raise the iDeCo participation eligibility age
As a result of the workstyle reforms and the fact that companies need to make efforts toensure workers up to the age of 70 have job opportunities, we will raise the participation
eligibility age for participating in iDeCo to 70. For this reason, along with next year’s Financial
Verification of Public Pension Plan, necessary legislative measures will be taken.
3) Raise the iDeCo contribution limit and raise the upper limit on the receiving benefits age
Regarding raising the iDeCo contribution limits and raising the upper limit of age eligibility
to start receiving benefits, a conclusion will be reached in conjunction with next year’s
Financial Verification of Public Pension Plan.
(5) Creating a system to encourage the provision of neutral and reliable advice toconsumers
70% of consumers do not see the need to invest in securities. 40% said "there is a possibilityof losing money", and 30% each said, "I don't have knowledge about finance and investment"and "it's like gambling," suggesting that there is a great deal of concern due to lack ofknowledge.
On the other hand, when asked "would you want to purchase risky financial products if there
was someone who could give you advice or help you with the procedures while understanding
your point of view?", 50% of those in their 20s and 40% of those in their 30s, and an overall
average of 25%, responded that they would like to make a purchase. 26
There is a need for a neutral advisor that can fill in the gaps in consumer knowledge and at
the same time can be trusted by the consumer.
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Therefore, we will promote the visibility of neutral advisors and work to ensure that such
advisors widely provide high-quality, customer-oriented advice. Within the next year, a new
public organization will be established to promote financial and economic education. As aproject to improve the environment for the smooth provision of advice and to train advisors,
the organization will provide certification of neutral advisors and support these advisors inensuring they continue to provide quality service.
(6) Enhancing asset formation for employees
To encourage companies to utilize neutral certified advisors in the workplace, we willencourage companies to subsidize employees when they use neutral certified advisors.
In addition, we will encourage the active use of neutral certified advisors at sites set up
within companies to provide employees with consultations on asset formation.
(7) Enhancing financial and economic education
We will deliver financial and economic education to the public at large. To this end, alongwith the Japanese government and the Bank of Japan, the cooperation will be obtained fromprivate financial and economic-related organizations, such as the Japanese Bankers
Association and Japan Securities Dealers Association, in developing and establishing an
operational structure, and securing operating expenses, as well as the establishment of theOrganization for the Promotion of Financial and Economic Education, and develop a systemfor promoting financial and economic education, including in local communities, throughpublic and private sectors. In addition to establishing the organization for financial andeconomic education, we will develop a public relations strategy that appeals widely to the
public, along with the enhancement of continuing education for company-based employees
and the implementation of financial and economic education by local governments. Also,
efficient and effective financial and economic education will be implemented nationwide
through public private partnerships, such as instructional visits to schools and companies aswell as holding symposiums.
In addition, a program for the public pensions quick calculator which estimates how mucha person could receive pension benefits in the future will be made public in order to promote
cooperation with private sector services.
(8) Realization of an international financial center open to the world
Alongside promoting initiatives aimed at establishing Japan as an "international financial
hub for the world and Asia," in order to strengthen our outreach to overseas businesses, wewill effectively and strategically disseminate information by expanding public relations
channels to major overseas media and by holding promotional events both in Japan andoverseas, including the launch of "Japan Week (provisional name)," which will intensively
invite overseas financial businesses to Japan.
(9) Stimulation of financial and capital markets
1) Support for startups
Proprietary Trading Systems (PTSs) operated by securities companies are not permitted tohandle unlisted stocks even for professional investors. In order to enable the handling ofunlisted stocks for professional investors so that startups can grow without being listed, therelevant Cabinet Orders for the Financial Instruments and Exchange Act will be revised during
this fiscal year.
2) Stimulation of the ESG bond market, etc.
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In order to steadily increase the amount of ESG bonds issued, Ministry of the Environment
will further expand the current guidelines, establish a corporate data platform in collaboration
with the Japan Exchange Group (JPX), improve the environment for facilitating transition
finance (improving sector-specific technology roadmaps, etc.) and further enhance disclosure
regulations. Also, we will encourage efforts to expand ESG products with capitalcharacteristics.
In addition, basic guidelines for impact investment will be compiled by the end of this fiscal
year and the creation of projects will be promoted.
3) Investment in human capital
In order to focus on how information on human capital should be disclosed, "Guidelines for
Human Capital Visualization" was published as a comprehensive guide for organizing thedirection to be taken. Efforts to promote will be made to accelerate effective investment in
human capital.
Furthermore, for increasing corporate value over the mid- to long-term, we will promote thedevelopment of disclosure standards related to human capital and the enhancement ofsustainability information disclosure. We will actively contribute to discussions on theformation of international standards for human capital disclosure.
4) Corporate governance reforms
Based on the "Action Program for Accelerating Corporate Governance Reform: From Formto Substance," we will encourage the management with an awareness of profit-making, growth,and sustainability issues, as well as constructive dialogue between companies and investors.
We will follow up on these efforts.
5) Formation of a GX financial hub in Asia
In order to gather information, human resources, and funds related to GX investment in Asia,
we will broadly aggregate corporate disclosure data, including CO2 emissions, on the data
platform owned by the Japan Exchange Group. We will form a consortium in which the public
and private sectors participate and support the formation of projects and the creation of carbon
credits.
6) Enhancing market infrastructure
We will take necessary measures based on the points relevant to the easing of the upper limit
for transactions at Proprietary Trading System (PTS). In addition, financial instruments
exchanges including the Tokyo Stock Exchange will encourage listed companies with a large
amount of investment units of their stocks to reduce the amount of investment units.
7) Revision of regulations on firewalls between banks and securities companies
From the perspective of promoting initiatives in banks and securities companies tostrengthen financial functions, such as making it easier to provide products and services thatmeet customer needs by integrating banking and securities services business, while
appropriately monitoring the status of user protections such as customer information
management, conflict of interest management, and the effective prevention of abuse of adominant bargaining positions, we will consider making the firewall regulations (prohibiting
the non-consensual sharing of clients’ non-public information between banks and securities
companies in a financial group) especially about the prohibition of dual registration of a sales
representative in line with the above perspective and consider measures we need to take.

65

(10) Globalization of financial administration and tax systems
In addition to strengthening the functions and structure of the Financial Market Entry Office,by starting with an understanding of procedural issues related to revitalizing cross-borderinvestment, we will understand the various taxation issues involved in becoming an"international financial hub" and take measures to make the necessary revisions.
(11) Improvement of the living and business environment to support highly skilled
foreign financial-related human resources
We will improve the living and business environment to support foreign nationals withadvanced financial skills, including by encouraging financial institutions to facilitateprocedures for them to open a bank account.
(12) Ensuring customer-oriented business conduct
It is necessary that financial services providers and those involved in the operation of
corporate pension systems institute a cross-section of necessary measures to establish and raise
the level of initiatives that are in the best interests of customers. We have submitted a bill to
the Diet that partially amends the Financial Instruments and Exchange Act, which stipulates
the obligation of financial services providers and those involved in corporate pensions to
conduct their business while taking into consideration the best interests of their customers.
Necessary measures to ensure customer-oriented business conduct will also be taken.
2. Promotion of efforts to become an asset management nation
Currently, 500 trillion yen out of Japan's 2,000 trillion yen in household financial assets is
managed via asset management companies and asset owners such as pension funds, andimproving their investment capabilities is essential to increase returns to households and toencourage greater investment.
On the other hand, it has been pointed out that some asset management companies and asset
owners are not making sufficient efforts to improve their asset management capabilities, suchas a lack of expertise and human resources compared to overseas. For this reason, we will
make efforts to realize an asset management nation in order to strongly promote thesophistication of the asset management industry and to strengthen the functions of asset owners,
who manage household financial assets as institutional investors.
Specifically, we will fundamentally reform the asset management industry, etc. byimproving governance and strengthening systems of asset management companies and asset
owners; by promoting more effective implementation of stewardship activities (dialogue withcompanies); by expanding support for the new entry and promoting competition of domestic
and overseas asset management companies; and by improving the environment for enhancing
asset management capabilities and diversifying investment targets, etc.
In order to bring Japan's investment sector to a world-class level, a concrete policy plan
including these initiatives will be compiled by the end of this year under the Council of New
Form of Capitalism Realization, and necessary actions, including the active dissemination of
information both domestically and internationally, will be promoted.

Ⅷ. Multipolarization of the Economy and Society
1. Realizing the Vision for a Digital Garden City Nation(1) Infrastructure development for the realization of the Vision for a Digital Garden City
Nation and improving the living environment in hilly and mountainous areas

661) Mass overhaul reforms of regulations and systems and implementing demonstration
projects
The Special Commission on Digital Administrative Reform will intensively reform thefollowing seven analog regulations, etc.: i) visual inspection regulations, ii) field audit
regulations iii) regular inspection and other inspection regulations, iv) residency/full-time
regulations, v) written-notice regulations, vi) in-person course regulations, and vii) on-site
viewing regulations.
Based on the review policy and process chart, regulations (1,000 items) that requireconfirmation as to whether existing regulations and systems can be replaced by digitaltechnology will be reviewed at an early stage. Based on the results of the review, by the next
spring, the laws and regulations (10,000 articles) and notices and notifications, etc. (2,500
articles) related to seven analog regulations, etc., will be revised and reviewed. In addition, aprocess chart for being able to digitally complete administrative procedures, etc. by FY2025
will be prepared and implemented.
The government will also promote Super City and Digital Garden Health Special Zone thatare expected to lead the Vision for a Digital Garden City Nation.
2) Development of digital infrastructure such as fiber-optic network and 5G network
With regard to fiber-optic network, we have set a mandatory target of 99.9% household
coverage by the end of Fy2027 and will further develop all regions where is required.
Additionally, we aim to develop a telecommunication environment that contributes to the"GIGA School Program" within the current fiscal year, and, if there are requests by local
governments (with more than 1.5 million households) for the installation of fiber-optic
equipment, then we will support the smooth and systemic transition to private installation.
With regard to 5G network, we will support the development of base stations in
disadvantaged regions, setting a mandatory target of 99% population coverage by the end of
FY2030. In addition to residential regions, base stations need to be installed in non-residential
areas such as major roads from the viewpoints of inbound traffic, industrial use, and disasterprevention, and this will be supported.
Prompt switching to another company's communication lines in the event of acommunication accident is also an issue. We will aim for the social implementation within
FY2025 of a system that allows for the use of other companies' base stations in the event of acell phone service outage.
Utilizing the regional councils that have been established, we will promote matching
between digital infrastructure and digital implementation in regions.
3) Improving the living environment in hilly and mountainous areas through digitaltechnology
Population decline and aging are rapidly progressing in hilly and mountainous areas, and anincreasing number of communities are finding it difficult not only to maintain and manage
agricultural land and to continue agricultural production activities, but also to maintain theircommunity functions. In order to solve these issues and to revitalize local communities, suchas the Region Management Organization for rural areas (RMO) , which complement thefunctions of multiple communities, will provide support to regions that are working toconserve and manage agricultural land using smart agricultural machinery and that are
working on shopping assistance using ICT.
4) Accelerating the horizontal development of best practices using subsidies
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In order to systematically implement digital technology in rural areas, the Vision for a
Digital Garden City Nation Grant was established to support hardware and software projects
in which ambitious local governments collaborate with private businesses. This subsidy will
accelerate the resolution of regional issues and will not limit good practices to the initiativesof the municipality in question, but will lead to their horizontal development in othermunicipalities.
Among the efforts of local governments, we will also work to standardize services andsystems and to establish standard specifications and requirements for receiving online
applications and for information counter work, etc.
5) Continuing and strengthening Digi-den Koshien (National Championship for Achieving a
Digital Garden City Nation)
In order to discover and horizontally develop pioneering examples of future services inregions, we will continue and strengthen Digi-den Koshien, an award for outstanding
initiatives with the participation of local governments, companies, and the public. By
introducing these outstanding examples of digital implementation, including examples from
Digi-den Koshien, we will bring out the horizontal deployment of digital implementation
throughout the country and strengthen the dissemination of these efforts both domestically andinternationally, while also taking advantage of opportunities such as the Expo 2025 Osaka
Kansai, Japan.
6) Improving digital literacy
To improve the basic digital literacy of all citizens, including the elderly, we will provide
subsidies for local governments that conduct courses to improve digital literacy by utilizing
social education facilities such as community centers and elementary and junior high schools.
In addition, Digital Supporters and other instructors will conduct seminars on the use ofsmartphones at cell phone stores and other locations in cooperation with local companies andmunicipalities, even in areas without cell phone stores, to reach a total of 500,000 participants
per year.
7) Cultivation of digital human resources
By the end of next year, we will gradually construct a system that can train 450,000 digital
human resources who will lead the way in solving regional issues, and will secure a total of
3.3 million people by FY2026. To this end, we will establish specific development plans andwill follow up on in each area, including the development of university and college oftechnology students (170,000 people/year), skill enhancement support for working adults(130,000 people/year), and vocational training (135,000 people/year).
In particular, based on the fact that some universities and colleges of technology (KOSEN)
face problems in securing instructors, the fact that there is limited educational content for
adults, and the fact that digital-related courses in colleges of technology (KOSEN) are
unevenly distributed in urban areas, we will employ practitioners in order to secure digital
education instructors at universities and colleges of technology; provide and enrich educational
content for adults via the internet; and strengthen digital-related courses in vocational training
according to the characteristics of the industries and employment in each region. Additionally,in order to promote DX in regions, we will secure and develop digital human resources in local
governments.
8) Matching for human resources who support regions
In order to meet the human resource needs that are essential for the growth of regional
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companies, we will utilize the platform that stocks human resources with career in large
company and strengthen matching by regional financial institutions.
(2) Development of regional transportation, healthcare, and education to support the
Digital Garden City Nation
1) Social implementation of automated driving
We will promptly promote the social implementation of automated driving, starting withlow-speed, fixed-route buses, etc., where the technology is maturing. In order to realize social
experiments with automated driving in all prefectures by around 2025, we will support casesof initiatives for introduction through public-private partnerships. In addition, we will promote
the social implementation of MaaS (Mobility as a Service) and driverless taxi.
Furthermore, by promoting the development of the local 5G necessary for automated driving
and the establishment of automated driving support roads (e.g., lanes for automated truck andbus vehicles), we will realize driverless automated driving mobility services at more than 100
locations by FY2027. In addition, geospatial information (G-spatial information) will be
developed and utilized for the safe operation of automated driving and drones.
2) Development of transportation infrastructure and redesign of local public transportation
In suburban and depopulated areas (1,200 local governments with a population of 50,000 orless), private vehicles account for 70% of transportation, and securing a means oftransportation within the area can be an issue, particularly for elderly individuals who haveturned in their driver's license.
In order to promote the reconstruction of regional public transportation, it is necessary forthe government to be actively involved so that discussions between regional stakeholders, suchas railway operators and local governments, proceed smoothly. By FY2027, the KPI is tocertify 300 projects to implement regional public transportation redesigns by local
governments and operators based on the Act on Revitalization and Rehabilitation of Local
Public Transportation Systems, and collaboration amongst regional stakeholders will be
encouraged.
Additionally, early within the current fiscal year, in order to ensure that individuals who
conduct paid transportation for private use can receive appropriate compensation, we willrevising the current pricing guidelines, which are approximately half of regional taxi fares, andwill relax the requirements for setting up taxi offices, etc.
GX for transportation will also be promoted, such as by promoting the use of commercial
electrified vehicles through public-private partnerships, including fuel cell buses and trucks
using hydrogen.
3) Development of a comprehensive community care system
As average life expectancy increases, it is important to strike a balance between physicallife expectancy and healthy life expectancy. We will realize a system (regional comprehensive
care system) that comprehensively secures medical care, nursing care, prevention, housing,and lifestyle support according to elderly individuals' wishes, and will create an environment
in which the elderly can continue to live in familiar areas to the greatest extent possible.
Specifically, we are aiming to complete a community-based integrated care system by 2025,
when the baby boomer generation will be 75 years old or older, and will promote efforts inmedical care and nursing care.
The development and introduction of nursing care robots and ICT equipment by nursing
care service providers will be promoted, and, amidst the decline in the working-age population,
we will work to improve the productivity of nursing care sites and workplace environments.
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From the perspective of preventing individuals from feeling forced to leave the workforce toprovide care for elderly relatives, it is necessary to enable flexible combinations of services
that meet the needs of each elderly individual, to improve the lives of the elderly, and to reducethe burden on caregivers. We will promote efforts to expand the use of services not coveredby long-term care insurance, while also paying attention not to impede the provision of longterm care insurance subsidies, including from the perspective of balancing caregiving andwork.
4) Promotion of GIGA Schools
The GIGA School Concept will be promoted through developments such as providing one
computing device per student and installing high-speed telecommunications networks, anddigital technology will be used to enable optimal learning for children.
To make learning through the use of one computing device per student more effective, while
verifying their utilization status and the status of sustainable utilization plans related tomaintenance and renewal by each local government, regarding the GIGA School Concept, "1device for 1 student," that is being promoted as a national policy, we will steadily update it as
an essential tool for public education, and, by the next fiscal year, we will formulate a policy
regarding the necessary level of development of the ICT environment in schools, such as for
an internet environment that supports learning, support staff, and large monitors, etc.
5) Promotion of mid-tier businesses and SMEs
In order to promote mid-tier businesses and SMEs with growth motivation that supports
high quality regional employment, intensive support will be provided through budgetary andtax systems, etc. for initiatives such as support for labor-saving investments for resolving labor
shortages; the creation of management strategies; for efforts to acquire, develop, and retain
human resources; for acquiring external demand; for M&A; and for innovation.
6) Support for business operators working to solve local issues
In order to create companies ("zebra companies") that will play a role in solving local social
issues from local SMEs and that will attract impact investment and financing, we will build an
ecosystem centered around local stakeholders that support social businesses.
7) Improving the management capabilities of sole proprietors, including freelancers
We will work on management education related to managerial and financial strategies forsole proprietors, including for freelancers working on new businesses.
(3) Ensuring security as a precondition for Vision for a Digital Garden City Nation
1) Development of wide-area transportation infrastructure
In order to support the livelihoods and economic growth of rural areas, we will continue todevelop and utilize high-speed transportation networks such as expressways, seibi-shinkansen
high-speed train lines, and linear chuo shinkansen high-speed maglev train, as well asinternational hub airports and ports. In addition, research and study will be carried out on their
future direction according to actual regional situations, such as the high functionality of thebasic plan route and trunk railway network.
In particular, with regard to the linear chuo shinkansen high-speed maglev train, we will
work with the local governments along the line to promote the early development of the
Shinagawa-Nagoya section, and, in order to accelerate the opening of the entire line, we will
cooperate with local governments along the line and provide the necessary guidance andsupport so that this year the construction entities can begin the environmental impact
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assessments between Nagoya and Osaka.
2) Dealing with the "2024 Problem" in logistics
In the logistics industry, there is a labor shortage, with twice as many job offers for truck
drivers as there are applicants, and, because an upper limit on overtime work will be applied
from next year (the “2024 Problem”), responding to the labor shortage and improving
productivity are urgent issues.
In order to rectify inefficient business practices such as long waiting times for cargo anduncontracted cargo handling, we will consider regulatory measures, etc. Within the current
fiscal year, we will take necessary measures and efforts to facilitate cost pass-through and othermeasures to improve wage levels.
We will promote modal shifts, electrification, GX that transports cargo and passengers at
the same time on a single vehicle, autonomous driving, the spread of truck reservation systems,
DX such as automation and mechanization, the introduction and standardization of pallets andcontainers, functional enhancements for logistics hubs, regulatory adjustments for increasing
truck speeds on expressways, and improving productivity and securing workers. Furthermore,
we will promote the introduction of mechanisms that are meant to encourage changes in the
behavior of consumers and companies shipping goods, such as making it obligatory forcompanies shipping goods to appoint a general manager for logistics and adjusting incentives
for consumers to reduce redeliveries.
The Digital Lifeline Development Plan will be formulated by the end of this fiscal year, andUAM (Urban Air Mobility) corridors will be established based on this plan, aiming for the
early social implementation of drone logistics.
3) Realization of a sustainable local economies and societyi) Changing consumer behavior and promoting regionally-led initiatives
In order to realize the decarbonization amongst communities and in daily life, we will
stimulate demand by encouraging behavioral and lifestyle changes among citizens andconsumers through national movement for new and prosperous lifestyles toward
decarbonization. In addition, at least 100 Decarbonization Leading Areas will be selected by
FY2025, and their efforts will be encouraged. Furthermore, a system will be introduced tosupport the creation of a resilient resource circulation market over the medium- to long-termby accelerating resource circulation through collaboration between “arterial industries” and“venous industries” in the region.
ii) Introduction of renewable energy that is in symbiosis with local communities
From the perspective of ensuring appropriate business discipline, the acquisition of permits
and licenses for land development that can directly affect disaster risk will be made arequirement for application for accreditation under the FIT/FIP system.
In addition, for geothermal power, hydroelectric power, and biomass power, necessary
support will be provided according to the characteristics of each power source, such as byimproving the business environment via constant reviews of the necessary regulations andsystems, business feasibility surveys and resource surveys, technology development, andsupport for the introduction of AI and IoT, etc.
iii) Promotion of the stable supply and utilization of domestic timber in regions as a whole
Local stakeholders will work together to ensure a stable supply of domestic timber byutilizing ICT such as drones, thereby improving the efficiency of forest resource surveys andlogging, and reducing the costs of reforestation. In addition, we will strengthen measures at
71each stage from production and processing to distribution and use, such as by constructing
forest roads that can accommodate large vehicles, expanding timber processing anddistribution facilities, promoting conversion to domestic timber in the housing sector, andexpanding the use of timber in non-housing sectors, etc.
iv) Integrated efforts for realization
Based on G7 results, we will promote an integrated shift to economic and social systems
that are net zero (in which the greenhouse gas emissions by anthropogenic sources andremovals by sinks are balanced), circular, and nature-positive. As for nature-positive systems,
we are considering a legal system to certify voluntary efforts for biodiversity conservation,with a view toward submitting it to the Diet during the current fiscal year; we are supporting
companies' participation in frameworks for disclosing natural capital risks, such as Taskforce
on Nature-related Financial Disclosures (TNFD) and are promoting green infrastructure andGX urban development, etc.; and we are working to disseminate information in an easy-tounderstand manner that will lead to the promotion of public understanding.
4) Accelerated investment in national resilience and disaster prevention and mitigation
Based on the Fundamental Plan for National Resilience, necessary and sufficient budgets
will be secured, and integrated hard and soft initiatives will be vigorously promoted.
In addition to promoting the Five-Year Acceleration Plan for Disaster Prevention, Disaster
Mitigation, and Building National Resilience, we will also promote medium- to long-term,
continuous, and stable efforts. Toward the steady promotion of national resilience after the
implementation of these measures, we will also conduct studies based on the revised Basic Act
for Resilience Contributing to Preventing and Mitigating Disasters for Developing Resiliencein the Lives of the Citizenry.
Regarding the new Basic Plan to be formulated this summer, in addition to the development
of disaster prevention infrastructure, etc., the pillars of the new measures will be "advanced
measures for national resilience through the use of digital technologies, etc.," and "further
strengthening regional disaster prevention capabilities," and we will maximize the use ofdigital technologies and regional capabilities to build national resilience.
In order to promote disaster prevention DX and disaster prevention science and technology,
we will strengthen cooperation with the systems of each government agency, etc., centered on
the Next-Generation Integrated Disaster Management System (scheduled to begin operation
during the next fiscal year), build a digital disaster prevention platform that unifies disaster
information by FY2025, and promote the development of disaster prevention-related
technologies.
In light of the current surge in material prices, while requesting appropriate contract changes
from relevant organizations, we will also promote measures in the construction industry forcost pass-through, such as examining the appropriateness of risk sharing when contracts areconcluding. As for measures to address heat illness, we will develop a special Heat Stroke
Alert information announcement system for heat illness and secure heat shelters (coolingshelter).
5) Management and utilization of vacant houses
As for measures to address vacant houses, considering the importance of measures toaddress disaster and based on the Act on Special Measures for Promotion of Measures for
Vacant Houses, etc., in addition to promoting the removal of vacant houses, we will encourage
usage changes and rebuilding by designating areas that require the intensive use of vacanthouses, and, via designated private corporations, we will support the use of vacant houses for72households that are raising children. Additionally, thorough guidance and recommendations
will be given for vacant houses that are not properly managed, and securing proper
management of vacant homes will be promoted. In conjunction with this, through theutilization of vacant houses we will promote dual habitation.
2. Promotion of overseas business investment by Japanese companies
With a view to strengthening Japan’s growth potential and ensuring its economic security,
it is important for the Government to support overseas business investment by Japanesecompanies with advanced technologies and will to invest overseas. This includes supporting
SME’s activities to develop new products or to cultivate overseas sales channels. Based on the"Overseas Business Investment Support Package," the Government will work as one team tosupport overseas business investment, by, for example, utilizing diplomatic channels to
promote Japan’s leading-edge technologies and by publicizing available menus of supporting
measures through the Japan Chamber of Commerce and Industry. We will also benchmark the
track record of cooperation with Japan’s diplomatic establishment overseas as well as that ofsuccessful cases of Government support, and progress in these areas will be followed up on
every six months.

Ⅸ . Promoting Inbound Tourism by Taking Advantage of Japan's
AttractivenessBased on the revised Tourism Nation Promotion Basic Plan, we will promote measures tocreate sustainable tourism regions, recover inbound tourism, and expand domestic exchanges
to achieve, before 2025, inbound consumption of 5 trillion yen and domestic travel
consumption of 20 trillion yen.
(1) Maintaining content
Efforts will be made to recover inbound tourism by international visitors. Special
experiences will be provided for adventure tourism, new content will be created, including for
medical tourism and location tourism, and intensive support will be provided for attracting
high value-added international visitors. We will promote improvements to the appeal ofnational parks via private proposals, create internationally competitive snow resorts, anddevelop tourist towns that utilize historical resources. Additionally, in order to promotecultural tourism, we will support the use of cultural facilities such as “night of museum”, theutilization of Japan Heritage, and the development of cultural tourism locations, while also
developing a wide variety of contents such as sports tourism, countryside stay, and cycle
tourism.
On the other hand, in terms of domestic demand, efforts will be made to cultivate new
demand and to promote travel on weekdays in order to expand domestic exchanges. In addition
to further promoting the spread and establishment of workations, etc., and there will be
improvements to the environment for establishing a second hometown/residence and foruniversal tourism.
(2) Facilitating acceptanceIn order to promote improvements to the environment for accepting international visitors,
airline networks will be recovered and strengthened through labor savings, automation, andoperational efficiency in airport operations, international hub airports will be developed, for73the revival of cruises there will be initiatives for the full-scale recovery of cruises to Japan,
access to international transportation will be improved, the introduction of cashless paymentsin public transportation and tourist spots will be supported, and support for international
visitors at traditional performing arts performances will be promoted. Furthermore, we will
steadily promote measures to accommodate international visitors, such as visa relaxations,strengthening cooperation among the relevant agencies for CIQ procedures, ensuring an
acceptance system by introducing immigration examination that utilize state-of-the-art
technology, and developing tourist information centers.
On the other hand, in order to improve the environment for accepting individuals withdisabilities and the elderly, etc., we will steadily promote integrated and comprehensive
barrier-free access to public facilities, etc.
In addition, efforts will be made to prevent congestion and etiquette violations due to anincrease in the number of international visitors.
(3) Destination management
We will work to create sustainable tourism destinations while striving to refine Japan's
unique tourism and cultural resources such as hot springs, inns, food, culture, and history
through the revival and high value-addition of tourist attractions and tourism industry thatutilize multi-year planning and continuous support measures, and tourism DX, etc. The
government will also work on the early inscription of Japanese sake, shochu, and awamori,etc. on the Representative List of the Intangible Cultural Heritage of Humanity of UNESCO.
In addition, with Destination Management Organizations (DMO) as the core, in order tobuild appropriate tourism management systems and to formulate and implement sustainable
tourism strategies that do not rely on temporary subsidies, in addition to supporting local
initiatives, we will support strengthening of the DMO systems, such as by recruiting external
specialists, securing and training core human resources, and securing financial resources suchas accommodation taxes.
(4) Culture and the arts
In anticipation of post-COVID-19 inbound tourism, full-scale efforts will be made to attract
international art fairs in order to improve the appeal of the art market.
Additionally, in consideration of the fact that there is a limit to amount of self-help thatowners can provide, a framework for public-private partnerships to support disaster recovery,
fire and earthquake protection, and the repair and utilization of cultural properties that are thepride of various regions, such as famous castles, will be specified during the current fiscal year.
In order to secure opportunities for children to appreciate and experience culture and art, we
will support the appreciation and experience of full-fledged cultural arts at schools, local
theatres, and music halls, etc. Additionally, there will be consideration of measures to improve
culture and arts education, and a conclusion will be reached within the current fiscal year.
(5) Sports
In order to erase the impacts of COVID-19 and turn sports into a growth industry, securing
new revenue sources for stadiums, arenas, and sports organizations is an issue. In addition topromoting community-based activities such as integration with sports tourism and community
development, there will be work to increase profitability by utilizing digital technologies.

Ⅹ. Initiatives in Individual Fields

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1. Space
To contribute to disaster prevention and mitigation, via public-private partnerships, thegovernment will promote demonstration projects and the development and demonstration of
next-generation technologies in order to build by 2025 a constellation satellite in which
numerous, small Synthetic Aperture Radar (SAR) satellites coordinate together. We will alsosteadily proceed with the development of next-generation geostationary meteorologicalsatellites. Furthermore, we will promote the development and demonstration of nextgeneration technologies such as space optical communication networks and satellite quantum
cryptography communication so that they can be implemented in society around 2030.
The government will promote efforts to strengthen international competitiveness, such asincreasing the launch frequency of flagship rockets so that domestic and foreign satellites canbe launched while ensuring reliability after investigating the causes of the launch failure for
the H3 rocket, etc.
As for the Quasi-Zenith Satellite System, which will enable more precise positioning
without relying on other countries' GPS, an 11-satellite system will begin to be considered anddeveloped while steadily developing a 7-satellite system.
We will participate the Artemis Program, which aims for sustained human exploration of
the moon, and will promote the full-scale development of a manned pressurized lunar rover,etc. to realize the goal of having the first non-US astronaut to land on the moon in the late
2020s.
In order to accelerate innovation in the space field through public-private partnerships, andbased on the fact that the European and American space development agencies have thefunction of providing funds for technology development by universities and private companies
that are responsible for seed research and that private companies are aiming forcommercialization, we will strengthen the strategic and flexible funding functions of the Japan
Aerospace Exploration Agency (JAXA) so that private companies can predictably work on
research and development over multiple years.
2. Oceans
In enriching the content and functions of the Maritime-Domain-Awareness (MDA)
Situational Indication Linkages (MSIL), we will follow up on the needs for utilization. In
particular, data that can be used for selecting suitable sites for offshore wind power generation
will be steadily developed. In addition, we will implement global observations toward theconstruction of ocean digital twins and will increase the sophistication of simulation
technologies for the ocean environment. Regarding the Arctic Research Vessel, we will
steadily proceed with its construction and will also proceed with consideration of international
joint observations for after it is entering service.
We will promote the advancement of oceanographic observations in exclusive economic
zones and develop domestic marine resources such as seafloor hydrothermal deposits, methane
hydrate, and rare earth muds in the deep waters around Okinawa and other areas. To this end,
we will formulate strategies for the social implementation of autonomous underwater vehicles
that can be used in deep sea areas, and will develop technologies for miniaturization andunmanned operation.
To develop domestic marine resources, we will work on developing the necessary
technologies, will establish production processes, will assess resource quantities, and will
understand the environmental aspects, etc.
In addition to these efforts, as frontier fields we will strongly promote development andutilization in marine fields with predictability by formulating multi-year Ocean Development
75

Strategy and securing budgets.
3. Promoting external economic partnerships
We will deepen the Japan-Australia-India-U.S. (Quad) cooperation, as well as cooperation
with ASEAN, Pacific Island countries, Africa, Central and South America, and other countries,
and will further strengthen cooperation to promote a "Free and Open Indo-Pacific."
At the G7 Hiroshima Summit, the G7 members affirmed that they would strongly drive theglobal economy and lead efforts to realize sustainable growth. These results will be passed on
to the G20, which is chaired by India, and, at the Commemorative Summit which marks the50th year of ASEAN-Japan friendship and cooperation, a new vision for cooperation andconcrete cooperation will be presented from Asia to the world.
Japan will continue to lead the UK's accession process to the Comprehensive andProgressive Agreement for Trans-Pacific Partnership (CPTPP) while maintaining its highstandards in terms of market access and rules. We will aim for concrete results in initiatives
such as the Indo-Pacific Economic Framework (IPEF) and Data Free Flow with Trust (DFFT),
investment agreements, and strengthening economic and technical cooperation support for thecountries participating in the Regional Comprehensive Economic Partnership (RCEP)
Agreement to ensure its full implementation. Japan will also play a central role in international
rule-making, such as in e-commerce negotiations at the WTO.
Regarding DFFT, we will promote the establishment of an international discussion
framework as agreed upon at the G7 Hiroshima Summit and at the G7 Digital and Tech
Ministers' Meeting in Takasaki, Gunma, as well as public-private collaboration projects.
In order for the entire international community to work together to respond to the challenges
that are facing the world, the G7 will unite and strengthen its engagement with the countries
and regions known as the "Global South." Some of these countries have energy and mineral
resources, and play an important role in supply chains. We will strengthen our policy support
for companies doing business in the Global South.
4. Global Health
To attract private funds to the field of global health , building on the G7 outcome thatconsented to underscore the importance of the private sector's role in global health, we willbuild a framework for international collaboration to promote impact investment, and, withreference to good examples of impact investment that have been recently compiled, we will
also promote the spread of case studies on health investment and nutrition measures, etc., andwill promote the visualization of investment impact. We will accelerate cooperation withinternational organizations and public-private partnerships in the field of global health in orderto support international development and international contributions through the procurementof pharmaceuticals and medical devices from Japanese companies at internationalorganizations.
5. Creation of new industries in Fukushima and other north-eastern regions
We will promote the Fukushima Innovation Coast Framework including efforts at the
Fukushima Institute for Research, Education and Innovation (F-REI), which was launched in
April this year. In order to create new industries in the Hamadori area along the coast, we will
promote research and development, industrialization, and human resource development aswell as support for attracting companies.
Additionally, we will do our utmost for the recovery and reconstruction from the Great East
Japan Earthquake by decommissioning the TEPCO Fukushima Daiichi Nuclear Power Station,
addressing the reputational effects associated with the release of treated water, making out
76

efforts to lift evacuation orders in difficult-to-return zones more concrete, and working on
community development through culture and art such as movies.

Ⅺ. A Framework for the Realization of New Capitalism
1. Following-up
In order to specifically promote these action plans, EBPM will be implemented based on aprocess chart prepared for a five-year period, with follow-up on the status of implementation
every fiscal year, and the PDCA cycle will be implemented in accordance with the set KPIs.
2. Cooperation between public and private sectors
New capitalism can only be realized through the public and private sectors carrying out theirrespective roles. The government will work harder than ever to draw out the maximum powerfrom the private sector, asking it to use to make the most of this power to solve social issues
currently considered the government's domain.

77

<List of Footnotes>
1
Basic Data P1: Low Growth Rate in Real Wages Per Person2
Basic Data P2: Wage Differential between Domestic and Foreign Workers by Occupation
3
Basic Data P3: Current Status of Relearning Support Measures for Employed Workers
4
Basic Data P4: Re-skilling and Interprofessional Mobility
5
Basic Data P5: Wage Gap Relative to Skill Gap
6
Basic Data P6: Effects of Wage Subsidies on Re-skilling
7
Basic Data P7: Differences Between Conventional Japanese Membership-based
Employment and Job-based Personnel (Job-based Wages)
8
Basic Data P8-10: Improvement of Productivity by Utilizing Generative AI, Reduction ofIndividual Differences Between People by Utilizing Generative AI,
Changes of the Time Proportion Spent on Work by Utilizing GenerativeAI
9
Basic Data P11: Comparison of Trends in Corporate Entry Rates
10
Basic Data P12: Comparison of Trends in Corporate Exit Rates
11
Basic Data P13: Percentage of People who Consider Starting a Business to be a Desirable
Occupational Choice12
Basic Data P14: State of the Spread of Stock Options
13
Basic Data P15: Legal System for Stock Options
14
Basic Data P16: International Comparison of Revitalization and Bankruptcy for Business
Recovery (2022)15
Basic Data P17: Companies Ceasing Business Activities
16
Basic Data P18: Consultations about Continuation of Corporate Management
17
Basic Data P19: Perceived Excessive Debt in Companies
18
Basic Data P20: Impact of Debt on Business Restructuring Efforts
19
Basic Data P21: Points that Companies Place importance on During Business Revitalization
20
Basic Data P22: Overview of Pre-insolvency Proceedings and Business Restructuring
Programs Overseas
21
Basic Data P23: Provision of Personal Guarantees Provided by Business Owners
22
Basic Data P24: Issues with Personal Guarantees Provided by Business Owners
23
Basic Data P25: Motivations for Being Founding
24
Basic Data P26: International Comparison of the Composition of Household Financial
Assets25
Basic Data P27: NISA Usage Status
26
Basic Data P28: Willingness to Purchase Financial Products After Receiving Advice

78Grand Design and Action Plan for
a New Form of Capitalism
2023 Revised Version
Basic Data
June 16, 2023

Low Growth Rate in Real Wages Per Person○ Looking at the change in real wages per person in developed countries from 1991 to 2021, we can see that thegrowth rate of real wages per person remained low in Japan at 1.05 times, compared to 1.52 times in the U.S.,
1.51 times in the UK, and 1.34 times in France and Germany.

Real wages per person(1991=100)

International comparison of growth rate in real wages per person(1991=100)

160

152

150

151

UK

140

134

U.S.

130
120
110
100

Germany
100

105

France
Japan

1991年
1991
1992年
1992
1993年
1993
1994年
1994
1995年
1995
1996年
1996
1997年
1997
1998年
1998
1999年
1999
2000年
2000
2001年
2001
2002年
2002
2003年
2003
2004年
2004
2005年
2005
2006年
2006
2007年
2007
2008年
2008
2009年
2009
2010
2010年
2011
2011年
2012
2012年
2013
2013年
2014
2014年
2015
2015年
2016
2016年
2017
2017年
2018
2018年
2019
2019年
2020
2020年
2021
2021年

90

Note: Conversion to real values based on the U.S. dollar in 2021 (purchasing power parity basis). Figures were calculated by dividing the wages and salaries in thenational accounts by the number of employees, then multiplying it by the ratio of the average weekly working hours of full-time employees against the average
weekly working hours of all employees.
Source: Prepared based on OECD Stat.

1

Wage Differential Between Domestic and Foreign Workers by Occupation○ Between Japan and other developed economies, significant wage differentials exist even for workers holding the same
occupation. Such differences are especially prominent in fields that require a high level of skills (IT, data analytics, project
management, sales/marketing, technical research, management and planning, etc.).
○ As there are significant wage differentials between Japanese and foreign companies, eliminating wage differentials for each job
is unavoidable. Amidst the post-COVID labor shortage, Japan faces a critical situation as Japanese companies are increasingly
being deprived of human resources.
○ It is difficult to respond to the situation with seniority-based wage systems. To eliminate the wage differentials, there is a need toreview the employment system.

Wage differential between domestic and foreign workers by occupation
Japanesecompanies
Foreigncompanies (inJapan)

Total of all
occupations

Management/
Finance andGeneral affairs
Planning
accounting

HumanresourcesIT

Creative
designData analytics

Technical
research

Projectmanagement

Sales/
Marketing

Production

100

100

100

100

100

100

100

100

100

100

100

100

114

122

107

118

116

119

110

127

112

129

121

100

Singapore

165

174

165

170

163

172

163

178

167

180

173

171

Germany

157

156

148

157

151

155

133

150

156

163

166

154

U.S.

152

156

134

141

142

163

140

164

156

171

154

133

Korea

128

133

130

130

129

129

129

150

126

136

132

121

France

121

136

115

122

120

124

119

120

114

131

125

107

Canada

120

120

105

116

114

122

111

118

127

128

121

109

Italy

116

110

112

116

113

113

112

105

107

121

123

103

112

120

106

114

108

114

103

116

108

111

118

95

108

125

96

103

107

115

119

133

102

136

113

79

UK
China
(Beijing)

Note: For the global total cash-based compensation level by occupation as of January 2023 (senior professionals in their 7th to 10th years), the average wages in local currency for each position in each country
have been converted to real wages using 2021 purchasing power parity dollars (OECD), and the wages for each position in each country are shown as a ratio to figures in Japan, taking the wages for eachposition in Japanese companies to be 100.
Source: Prepared based on materials from Mercer LLC.

2

Current Status of Relearning Support Measures for Employed Workers○ Two funding routes are available as relearning support measures for employed workers in Japan. These are support
through companies, and support to individuals.
○ Among the relearning support measures for employed workers in Japan, support through companies make up 75% of thetotal at 77.1 billion yen per year, while direct support to individuals make up 25% of the total at 23.7 billion yen per year.
○ The growth rate in direct support to individuals has been limited in the past five years. To facilitate smooth labor
movement, it may be necessary to conduct reviews on support for employed persons, which is currently centered on
support through companies, by focusing on direct support to individuals.
○ In doing so, it may be necessary to provide individuals with career consulting and other services when expanding support
to individuals.

Relearning support measures for employed workers
Support through companies
Human Resources
Development Support
Subsidies

Details of
supportBudget• When the company itself, ora private educational andtraining institution entrusted
by the company, conducts
training related to theirworkers’ current jobs, thegovernment subsidizes thecompany from 30% to 75%of the expenses, dependingon the training contents.

68.1 billion yen

Public Vocational Training (Training for
employed workers)

Human Resources Productivity Support
Center
• Vocational training is conducted for
employed workers at Polytechnic Centers
and Polytechnic Colleges established by
the Ministry of Health, Labour andWelfare (86 locations across Japan), andpolytechnic schools established bymunicipalities.
• The course expenses for vocational
training are borne by the company.

9.0 billion yen

Direct support to individuals(employed workers)

Changes of the amount of the budget(100 million yen)

1000

Educational Training Benefits(Specialized practical educational training,
specific general educational training, general
educational training)• When workers take courses certified ascontributing to their careerdevelopment, etc., they (individuals)
are given benefits of 20% - 50% of thecourse expenses.
• Furthermore, in the case of specializedpractical education and training,targeted at the medium- to long-term
career development of workers, they
(individuals) are given additional
benefits of 20% if they obtain
qualifications/are re-employed within
one year from the end of the course.
23.7 billion yen

800
600

492

0

771
76.5％

622

615

76.3%

76.2%

Via
companies

81.4%

344

400
200

969
73.8%

194
113

26.2%

23.7%

192
23.8%

18.6％

2018

2019

2020

2021

237
23.5%

Via
individuals
2022

Note: In the figure shown on the right, "via companies" refers to Human Resources Development Support Subsidies, Public Vocational Training (training for employed workers), and operational subsidies used by Human Resources Productivity Support Centers,
as well as subsidies offered for vocational training conducted by municipalities (the budgets for operational subsidies and subsidies for municipalities are estimated based on the actual results in the settlement of accounts for the fiscal year in question). "Viaindividuals" refers to Educational Training Benefits. The figure shows the ratio of the respective measures to the total amount of relearning support measures for employed workers.
Source: Prepared based on materials from the Ministry of Health, Labour and Welfare.

3

Re-skilling and Interprofessional Mobility○ In Denmark, when re-skilling is carried out for highly applicable skills (general qualifications,classroom education, etc.), the increase of the new employment of job-seekers is greater in jobs
different from their former jobs and a smooth labor movement into growth areas is facilitated.
Rate of increasein employment

Job acquisition after payment of employment benefits tounemployed persons re-skilled in highly applicable skills

0.3

Jobs different from former jobs
0.2

Former jobs
0.1

Unknown

0

-0.1

0

1

2

3

4

5

6

7

Number of quarters
passed since start ofreceiving unemployment
benefits

Note: Based on 196,322 samples out of the unemployed persons who received unemployment insurance in Denmark from 2012 to 2018. Categorized into "former jobs," "different
jobs," and "unknown" using the three-digit code in the ISC008 Index of Occupational Titles.
Source: Anders Humlum, Jakob R. Munch and Mette Rasmussen ”What Works for the Unemployed? Evidence from Quasi-Random Caseworker Assignments” mimeo

4

Wage Gap Relative to Skill Gap○ Even within the same country, there are wage gaps corresponding to the skills required for jobs inother developed economies. For example, jobs that require a high level of skills, such as IT, data
analytics, project management, and technical research, command high wages.
○ In contrast, Japanese companies operate under a system with small wage gaps corresponding to theskills acquired, making it difficult for highly skilled human resources to be rewarded.
Wage gaps by occupation when the total for all occupations is 100
Total of all Management
Finance andGeneral affairs
occupations/ Planningaccounting
Japanesecompanies
Foreigncompanies (inJapan)

Human
resourcesIT

Creative designDataanalytics

Technical
research

Projectmanagement

Sales/
Marketing

Production

100

100

98

96

99

101

96

101

102

99

100

100

100

107

92

100

100

105

93

112

101

113

106

88

Singapore

100

106

98

99

97

104

95

108

103

108

105

103

Germany

100

100

93

97

95

99

81

96

102

103

106

98

U.S.

100

103

87

90

93

108

88

109

105

111

101

88

Korea

100

104

99

98

99

101

97

117

100

105

103

95

France

100

113

94

97

98

103

94

100

96

107

103

88

Canada

100

100

86

94

94

102

89

100

108

106

101

91

Italy

100

95

95

96

96

98

93

91

95

104

106

89

UK

100

107

93

99

96

103

88

105

99

98

105

85

China (Beijing)

100

115

87

91

98

107

106

123

96

124

104

73

Note: For the global total cash-based compensation level by position as of January 2023 (senior professionals in their 7th to 10th years), the wages for each occupation are shown as aratio to the total for all positions in each country, taking the total for all positions to be 100.
5
Source: Prepared based on materials from Mercer LLC.

Effects of Wage Subsidies on Re-skilling○ In Denmark, wage subsidies are provided to companies that make employees take re-skilling.
○ These wage subsidies offer a strong incentive for companies to carry out re-skilling on their employees.
○ In fact, looking at the changes in the number of participants in training courses (food hygiene inspection,
personal development for work and education, etc.), the number of participants fell dramatically when thegovernment reduced these wage subsidies by 20% in February 2011.
○ In other words, we can see that wage subsidies have a strong correlation with the number of re-skillingcourse attendees. In the case of Japan, re-skilling is not necessary a requirement that must be fulfilled inorder to receive Employment Adjustment Subsidies.
Number of participants in re-skilling courses (Denmark)
8000

6000

4000

2000

Announcementof reforms
0

Jan 2009

Jan 2010

Implementation ofreforms
Feb 2011

Jan 2013

Jan 2015

Source: Anders Humlum, and Jakob R. Munch and Mette Rasmussen. 2019. ”Globalization, Flexicurity and Adult Vocational Training in Denmark”
In Making Globalization More Inclusive (WTO)

6

Differences Between Conventional Japanese Membership-based Employment and Job-based Personnel (Job-based Wages)○ In the conventional Japanese membership-based employment system, recruitment is carried out primarily through mass
recruitment of fresh graduates, and transfers are company-led rather than based on the intentions of employees. Employees work
hard at jobs assigned to them by the company, and whether re-skilling for the future is applied and utilized in a job depends on
personnel reassignment. It is a system that makes it difficult for employees to develop their careers autonomously based on theirown will, which is the basis for structural wage increases.
○ There is a need to shift to a system that sets required skills corresponding to individual jobs, and in which employees select theirown jobs and re-skilling contents in consultation with their supervisors, with a view toward overcoming the skill gap.
Membership-based employment

Job-based personnel (job-based wages)
Personnel entry and exit (internal labor market and external labormarket are seamlessly connected)
Fairness of opportunity
Relationship between company and employees: Partners

No personnel entry or exit in principle
Fairness of results
Relationship between company and employees: Protector andaided persons







Grade: Job function
Remuneration: Seniority-based, internal contributions
Authority over personnel matters: Wage increases and bonuses
are centrally managedGrade: Role × Job position
Remuneration: Market value by job position
Authority over personnel matters: Wage increases and bonuses are
determined by each department

HRmanagement



Recruitment: Primarily mass recruitment of fresh graduates
Transfers: Company-ledRecruitment: Primarily recruitment by job position
Transfers: Opportunities for in-house recruitment (posting system)

HR operation

Manpower planning: Existing - Retirement age＋Fresh graduates
Job definitions: Not required

Manpower planning: Business-based
Job definitions: RequiredCareer development is company-led• Work hard at assigned jobs.
• Uncertain about career, but employment is guaranteed• Whether re-skilling for the future is applied and utilized in a job
depends on personnel reassignmentCareer development respects the will of individuals• Produce results to realize one’s desired career• Employees utilize in-house recruitment and job change to choose thecareer they want
• Strong motivation to acquire or improve skills on their own

Structurally difficult for autonomous career development tohappenStructurally easy to promote autonomous career development

Basic stance

HR system

Careerdevelopment

Characteristics

Source: Prepared based on materials from Mercer LLC.



7

Improvement of Productivity by Utilizing Generative AI○ According to an experiment conducted by MIT researchers, comparing cases where generative AI
was used to cases where not used in tasks such as reports and e-mails, it was found that (1) timerequired for the task was reduced significantly, and (2) the quality of the task was improved.

Time required for the task

Quality of the task

(Minutes)

Results

Time required for task
(self-reported)

Generative AI used in the second task
Generative AI not used in the second task

Generative AI used in the second task
Generative AI not used in the second task

First task

Second task

First task

Second task

Note: 444 highly experienced experts who were university graduates were recruited online and made to carry out two descriptive tasks. The targeted jobs were marketers, grantwriters, consultants, data analysts, HR personnel, and managers. The tasks comprised 20 – 30 minute assignments designed to mimic tasks that are actually undertaken inthese jobs, such as writing press releases, short reports, analytical plans, and e-mails. Evaluation of the results was conducted by three highly experienced experts in thesame line of job. Half of the participants, selected randomly, were instructed to register for generative AI (ChatGPT) between the first and second tasks, making the tool
available for their use. The remaining 50％ were instructed to use Overleaf, a non-generative AI tool for writing documents, between the first and second tasks.
Source: Shakked Noy and Whitney Zhang. 2023. ”Experimental Evidence on the Productivity Effects of Generative Artificial Intelligence” Working paper
8Reduction of Individual Differences Between People by Utilizing Generative AI○ According to the same experiment by the MIT researchers, using generative AI not only improved
the quality of the task and the time taken, but also reduced individual differences between people,
and improvements in homogeneity were observed.

Changes in the quality of the task

Time required for the task

第２タスクで生成AIの使用なし
Generative
AI not used in the second task
第２タスクで生成AIの使用あり
Generative
AI used in the second task

Results of first task (without using generative AI)

Time required for second task

Results of second task

(Minutes)
Generative AI not used in the second task
Generative AI used in the second task

Results of first task (without using generative AI)

Note: 444 highly experienced experts who were university graduates were recruited online and made to carry out two descriptive tasks. The targeted jobs were marketers, grantwriters, consultants, data analysts, HR personnel, and managers. The tasks comprised 20 – 30 minute assignments designed to mimic tasks that are actually undertaken inthese jobs, such as writing press releases, short reports, analytical plans, and e-mails. Evaluation of the results was conducted by three highly experienced experts in thesame line of job. Half of the participants, selected randomly, were instructed to register for generative AI (ChatGPT) between the first and second tasks, making the tool
available for their use. The remaining 50％ were instructed to use Overleaf, a non-generative AI tool for writing documents, between the first and second tasks.
Source: Shakked Noy and Whitney Zhang. 2023. ”Experimental Evidence on the Productivity Effects of Generative Artificial Intelligence” Working paper
9Changes of the Time Proportion Spent on Work by Utilizing Generative AI○ The use of generative AI significantly changes the proportion of time that people spend on work.
○ When generative AI is not used, people expend about 25% of their time on brainstorming, 50% onrough drafting, and 25% on editing. Using generative AI significantly reduces the proportion oftime spent on brainstorming and rough drafting, making it possible to allocate more time to editing
the final work.
Proportion of time spent on each process
Percentage of time required
for the process

Generative AI not used
Generative AI used

Brainstorming

Rough drafting

Editing

Note: 444 highly experienced experts who were university graduates were recruited online and made to carry out two descriptive tasks. The targeted jobs were marketers, grantwriters, consultants, data analysts, HR personnel, and managers. The tasks comprised 20 – 30 minute assignments designed to mimic tasks that are actually undertaken inthese jobs, such as writing press releases, short reports, analytical plans, and e-mails. Half of the participants, selected randomly, were instructed to register for generative
AI (ChatGPT) between the first and second tasks, making the tool available for their use. The remaining 50％ were instructed to use Overleaf, a non-generative AI tool for
writing documents, between the first and second tasks.
Source: Shakked Noy and Whitney Zhang. 2023. ”Experimental Evidence on the Productivity Effects of Generative Artificial Intelligence” Working paper
10Comparison of Trends in Corporate Entry Rates○ Compared to the U.S. and major European economies, Japan’s corporate entry rate has remained at
the low level of 4.4% in 2021. It is vital to steadily implement the Startup Development Five-year
Plan.
Trends in corporate entry rates

Corporateentry rates
16%

14.4%

14%
12%

12.5%
10.2%

10%
8%

9.8%

10.0%
9.7%

6.7%

4%

10.9%
9.2%
6.8%

6%
5.6%

5.6%

UK

12.3%

8.0%

4.4%

11.5%

12.6%
12.1%
9.4%

12.4%

フランス
France

11.3%
9.3%

U.S.

9.1%
7.2%

4.2%

Germany
4.4%

5.1%

日本
Japan

2%
0%
2016年
2016

2017年
2017

2018年
2018

2019年
2019

2020年
2020

2021年
2021

Note: Corporate entry rates are the proportion of newly opened companies in a year, against the total number of companies in the same year.
Source: Japan: Ministry of Health, Labour and Welfare, “Annual Reports on Employment Insurance Services,” U.S.: United States Census Bureau, “The Business Dynamics
Statistics,” UK: Office for National Statistics, “Business demography,” Germany/France: Prepared based on eurostat.

11

Comparison of Trends in Corporate Exit Rates○ Compared to the U.S. and major European economies, Japan’s corporate exit rate has remained at the low levelof 3.1% in 2021.

Trends in corporate exit rates

Corporate
exit rates
14%

11.7%

11.7%

12%

Germany

UK
11.1%

10.4%
10%
8%
6%

9.7%
8.3%
7.9%
4.7%

9.0%

7.8%
4.9%

10.5%

8.8%
8.7%
4.7%

8.5%

9.4%

U.S.
4.6%

4%
2%

10.3%
9.5%

France
3.9%

3.5%

3.5%

3.5%

3.4%

3.3%

3.1%

Japan

0%
2016年
2016

2017年
2017

2018年
2018

2019年
2019

2020年
2020

2021年
2021

Note: Corporate exit rates are the proportion of newly closed companies in a year, against the total number of companies in the same year.
Source: Japan: Ministry of Health, Labour and Welfare, “Annual Reports on Employment Insurance Services,” U.S.: United States Census Bureau, “The Business Dynamics
Statistics,” UK: Office for National Statistics, “Business demography,” Germany/France: Prepared based on eurostat.

12

Percentage of People who Consider Starting a Business to be a Desirable Occupational Choice○ In terms of the percentage of people who consider starting a business to be a desirable occupational choice,Japan is at the lowest level among major and developed countries, at 25%, compared to 79% in China and 68%
in the U.S.
Percentage of
responses

Percentage of people who consider starting abusiness to be a desirable occupational choice (2019)

90%
80%

79.3%
67.9%

70%

56.4%

60%

53.6%

50%
40%
30%

24.6%

20%
10%
0%
China
中国

U.S.
米国

UK
英国

Germany
ドイツ

Japan
日本

Note: The percentage of respondents in a survey conducted on 18 - 64 year-olds from 50 countries worldwide, who answered "Yes" to the statement "Many people in your country
consider starting a new business to be a desirable occupational choice."
13
Source: Prepared based on Global Entrepreneurship Monitor's "Adult Population Survey"

State of the Spread of Stock Options○ In Japan, 97% of startups that have launched an IPO utilize stock options.
○ On the other hand, from the viewpoint of startups, it has been pointed out that they face issues in the aspect oflegal systems, and challenges such as over-restrictive requirements for tax-qualified stock options.
○ The percentage of stock options of all shares issued by Startups is below 10% in Japan, but accounts for 15% to
17% in the U.S. This suggests that there is room for greater utilization in Japan.

Comparison between Japan and the U.S.
of stock options as a percentage of allshares issued by startups

Of startups that have launched IPO in
Japan, the percentage of companies using
stock options (2021)（％）
18

Not usingstock options
3%

16

15.3

16.0

16.3 16.2

17.2

U.S.

14
12
Used stock
options
97%

10
8
6

Japan
9.6

9.1

9
7.4

7.8

9

9.7

2015 2016年
2016 2017年
2017 2018年
2018 2019年
2019 2020年
2020 2021年
2021
2015年

Note: In the figure on the right, data for the U.S. is up till 2019. Values were calculated by taking the simple average of values separated by each corporate value after financing(below US$10 million - above US$1 billion).
Source: Prepared based on INITIAL's "Japan Startup Finance 2021," for the figure on the left, and on Pitchbook, nvca's "Venture Monitor"(2020), and materials from
Plutus Consulting Co.,Ltd. for the figure on the right.

14

Legal System for Stock Options○ When issuing stock options, there are differences between Japan and the U.S. with regard to matters that can be decided by the
Board of Directors and the period in which decisions are allowed to be made by the Board of Directors.
○ In Japan, decisions can be made on the number of stock options issued within the range decided upon at the General Meeting of
Shareholders, but this is limited to within one year from the General Meeting of Shareholders. Moreover, decisions cannot bemade on the price when exercising stock option rights and acquiring them as shares (exercise price), nor on the period in whichrights can be exercised.
Comparison of Japanese and the U.S. corporate law systems with regard to the issuanceof stock options in privately held companies (companies with restrictions on transfer of shares)
Japan
Matters established in
the General Meeting of
Shareholders

Matters that can bedecided by the Board of
Directors
Period in which
decisions are allowed tobe made by the Board of
DirectorsMaximum number of issues

Distinction between compensatory stock options andnon-compensatory stock options

U.S.



Maximum number of issues

Actual number of issues (within the maximum range)※ The exercise price and exercise period cannot bedelegated to the Board of Directors.

If compensatory, the amount required for acquiring
stock options



Exercise price, exercise period

Within one year from the General Meeting of
Shareholders

10 years from the General Meeting of Shareholders

If compensatory, the minimum amount required for
acquiring stock options



Actual number of issues (within the maximum range)

If compensatory, the amount required for acquiring
stock options (above the minimum amount)

Note: Even in Japan, in the case of a public company, it is possible to make decisions in the Board of Directors on the number of issues, amount required for acquiring stock options,
exercise price, and exercise period (except in the case of issuing new shares to third parties at particularly favorable prices (discounted issue)).

15

International Comparison of Revitalization and Bankruptcy for Business Recovery (2022)○ OECD sets indicators on the ease of business revitalization and business recovery in relation to bankruptcy, andperiodically evaluates the current status in each country.
○ Japan is rated as relatively difficult to recover, and is rated especially poorly in prevention of bankruptcy
through early diagnosis, etc.
Indicators related to revitalization and bankruptcy for business recovery
Difficult torecover

Means of business revitalization (operation during revitalization, treatment of
事業再生の手段（再生中の操業や再生の過程での経営陣の取り扱いなど）
management during the process of revitalization, etc.)

1.2

Treatment of failed entrepreneurs (remaining asset value and period to debt relief)
失敗した起業家の取り扱い（残される資産額や債務免除までの期間）

1.0

Bankruptcy prevention and enhancing management efficiency (early
倒産の予防と経営の効率化（早期の診断、再生手続きの有無など）
diagnosis, presence of rehabilitation procedures, etc.)

0.8
Total for each item
(Evaluated on a scale of 0 - 1.
The lower the number, theeasier the recovery.)(Maximum value is 3.0)

0.6
0.4
0.2

Easy torecover

0.0
英国
UK

フランス
France

米国
U.S.

カナダ
Canada

イタリア
Italy

ドイツ
Germany

日本
Japan

Note: Responses from each country to OECD's questionnaire on bankruptcy systems. G7 countries extracted from the target countries.
Source: Christophe André & Lilas Demmou, 2022. “Enhancing insolvency frameworks to support economic renewal,“ OECD Economics Department Working Papers 1738,
OECD Publishing16

Companies Ceasing Business Activities○ Looking at the financial results of closed and dissolved companies just before their closure or dissolution, thepercentage of companies with profits is falling every year, dropping to below 60% most recently. Conversely,
the percentage of companies registering losses is on the rise.
Trends in the profit/loss ratio of closed or dissolved companies
（％）

73

75
65

70

71.1

71

69.7

70.7

70.1
61.7

69.9

68.6

61.7

45

25

60.1

38.3
30

27

30.3
29

63.7

31.4

28.9

30.1

29.3

29.9

32.9

39.9

64

61.5

61.4

56.5

67.1

55

35

62.6

61.6

61.9

60.4

54.9
Profit
45.1

39.6

38.1
36

38.3

36.3

38.4

Loss

38.6
43.5
38.5

37.4

15

Source: Prepared based on Tokyo Shoko Research, “Survey on Trends for Closed or Dissolved Companies in 2022”17

Consultations about Continuation of Corporate Management○ Many companies without successors consult with their consulting tax accountants about business continuity, while only 3.8%
consult with supporting agencies (Support Centers for Smooth Business Succession, Yorozu Support Centers).
○ Yorozu Support Centers, established in all prefectures across Japan, serve as the comprehensive liaison office for supporting
SMEs, but consultations about business succession and cessation of business make up only 1.8% of all consultations.
○ Strengthening nationwide consultation functions for businesses facing problems is an important issue.
Parties that businesses consulted with
about future business continuity
（％）0

10

20

Contents of consultations with
Yorozu Support Centers（FY2021)

30

40Consulting
CPAs/ tax accountants
顧問の公認会計士・税理士

50

60
52.0

Relatives, friends/acquaintances
親族、友人・知人

35.1

Correspondent financial
institution
取引金融機関取引金融機関34.5

Officers/Employees
other than relatives
親族以外の役員・従業員

33.2

Managers of othercompanies
他社の経営者

27.8

Managers of取引先の経営者
business partners

23.2

Management
consultants
経営コンサタント

18.6

Non-advising
CPAs/certified tax accountants
顧問以外の公認会計士・税理士

14.6

Lawyers
弁護士

9.7

PrivateM&A intermediaries
民間のM＆A仲介業者

7.9

商工会・商工会議所

7.0

Society of Commerce and Industry/
Chamber of Commerce and Industry

Support Centers for Smooth
事業引継ぎ支援センター
Business Succession

2.1

YorozuSupport Centers
よろず支援拠点

1.7

Business succession
1.5%
Starting a business
10.7%

Cessation of business
0.3%
Re-challenge
0.1%Management
improvement/Business
revitalization 17.8%
Sales expansion
69.6%

Note: The figure on the left shows the parties that companies with no confirmed successors have consulted with about business succession in the past. The figure on the right shows thebreakdown of the contents of consultations with Yorozu Support Centers in FY2021. N=458,440.
Source: Prepared based on the White Paper on Small and Medium Enterprises in Japan (2017) for the figure on the left, and based on the Yorozu Support Center website for the figureon the right.

18Perceived Excessive Debt in Companies○ According to a questionnaire conducted on Japanese companies, the percentage of companies that
responded “has perceived excessive debt” was 16.2% for large companies and 33.0% for SMEs.
Perceived excessive debt (as of October 2022)
Large companies (678 companies)

SMEs (4,511 companies)*Capital of 100 million yen or more

Had perceived excessive
debt from before
COVID-19
49 companies, 7.2%
Had perceived
excessive debt after
COVID-19
61 companies, 9.0%

*Capital of less than 100 million yen

Has perceived
excessive debt
16.2％

Had perceived excessive debt but resolved
after COVID-19
14 companies, 2.1%
No perceived excessive debt
before or after COVID-19
554 companies, 81.7%

No perceived excessive debt before
or after COVID-19
2,868 companies, 63.6%

Had perceived excessive
debt from before
COVID-19
541 companies, 12.0%

Had perceived excessive debt
after COVID-19
948 companies, 21.0%

Has perceived
excessive debt
33.0％

Had perceived excessive debt but
resolved after COVID-19
154 companies, 3.4%

Note: Results of a questionnaire conducted on large companies and SMEs across Japan from October 3 - 12, 2022. Percentage of responses to the question "Which of thefollowing is applicable to your company's debt situation?" (No. of responses: 5,189 companies)
Source: Prepared based on Tokyo Shoko Research, "9th Questionnaire on Excessive Debt" (October 18, 2022)

19

Impact of Debt on Business Restructuring Efforts○ Of the companies that responded that they have perceived excessive debt, 30.9% of large
companies and 35.1% of SMEs indicated that debt hinders business restructuring.
Impact of debt on business restructuring efforts * Survey on companies reporting perceived excessive debt
Large companies (97 companies)

SMEs (1,375 companies)*Capital of 100 million yen or more

*Capital of less than 100 million yen

Unable to carry out
business restructuring
due to excessive debt
8 companies, 8.2%
No intention of carrying out
business restructuring
31 companies, 32.0%

Reduced the scale of businessrestructuring (including planned
restructuring) due to excessive debt
22 companies, 22.7%

Excessive debt but carried out
adequate business restructuring(including planned restructuring)
36 companies, 37.1%

Unable to carry out
business restructuring
due to excessive debt
188 companies, 13.7%

Has impact
due toexcessive debt
30.9％

No intention of carrying out
business restructuring
382 companies, 27.8%
Reduced the scale of businessrestructuring (including planned
restructuring) due to excessive debt
294 companies, 21.4%

Has impact
due toexcessive debt
35.1％

Excessive debt but carried out
adequate business restructuring(including planned restructuring)
511 companies, 37.2%

Note: Results of a questionnaire conducted on large companies and SMEs across Japan from October 3 - 12, 2022. Percentage of responses to the question "Does the debt
situation have an impact on your company's business restructuring efforts?" (No. of responses: 1,472 companies).
Source: Prepared based on Tokyo Shoko Research, "9th Questionnaire on Excessive Debt" (October 18, 2022)

20

Points that Companies Place Importance on During Business Revitalization○ Companies which had answered that they may consider corporate restructuring through private liquidation
process were asked about the points they place importance on when considering using private liquidation forbusiness restructuring purposes. The points placed importance on were, procedures do not impact on current
business/transactions (72.6%); procedures do not require large sums of money (67.5%); and procedures are
simple and do not take a long time (43.2%).

Points placed importance on when considering private liquidation*Survey on companies reporting that they may consider corporate restructuring
-

100社
100
companies

200200社
companies

300300社
companies

Do not impact on current
business/transactions

311 companies （72.7%）

現在の事業や取引に影響を与えないこと

Do not require large sums of
多額の費用を要しないこと
money

289 companies （67.5%）

Simpleand do not take a long
簡潔で長期間を要しないこと
time
Emphasized on equality among creditors
債権者間の平等を重視するものであること

185 companies（43.2%）
20 companies （4.7%）

Transparent through the involvement of
裁判所の関与によって透明であること
the court

14 companies （3.3%）

Other
その他

14 companies （3.3%）

Note: Results of a questionnaire conducted on large companies and SMEs across Japan from December 1 - 8, 2022. Percentage of responses to the question "What do you
place importance on when considering private liquidation for corporate restructuring purposes?" (Multiple answers) (No. of responses: 428 companies).
Source: Prepared based on Tokyo Shoko Research, "25th Questionnaire on COVID-19" (December 16, 2022)

21

Overview of Pre-insolvency Proceedings and Business Restructuring Programs Overseas○ In European countries, there are corporate restructuring systems that do not require the consent of all lenders
for changing rights (such as debt writeoff) through a majority vote with the approval of the court. However,such systems do not exist in Japan. Hence, it may be necessary to review the systems.

U.S.

FranceGermany

UK

SystemOverview

Scheme of Arrangement (SOA) Procedures that make it possible to change the rightsof creditors through a majority vote with theapproval of the court (For the Restructuring Plan,eligibility is restricted to companies going throughRestructuring Plan (RP)financial hardship, etc.)*Introduced in 2020

StaRUG*Introduced in 2021

Accelerated safeguard
procedures*Introduced in 2014 (Amended in
2021)

Chapter11

Procedures that make it possible to change the rightsof creditors through a majority vote with theapproval of the court

Adoption requirement

Usage status

Approval from majority of the creditors andapproval from creditors who are owed 3/4 Several tens of cases per
or more of the amount of claimsyear*According to interviews with

Approval from creditors who are owed 3/4 experts
or more of the amount of claims

About 10 cases per year
Approval from creditors who are owed 3/4*According to interviews withor more of the amount of claims
experts

6 cases (2018)

Procedures that make it possible to change the rightsof creditors through a majority vote with theapproval of the court in cases where mediation toreach an agreement on resolving an issue isunsuccessful

Approval from creditors who are owed 2/3 Justice of France (number ofor more of the amount of claims
cases including the system

Procedures that make it possible to change the rightsof creditors through a majority vote with theapproval of the court

Approval from majority of the creditors andapproval from creditors who are owed 2/3 8,333 cases (2020)*According to the U.S. Courts
or more of the amount of claims*According to the Ministry of
preceding accelerated safeguard
procedures)

Source: Survey conducted by the Ministry of Economy, Trade and Industry

22

Provision of Personal Guarantees Provided by Business Owners○ The Guidelines for Personal Guarantees Provided by Business Owners stipulate that financial institutions consider the
possibility of not requiring business owners to provide personal guarantees if they fulfil the following criteria: (1)Elimination of integration of corporate entities and business owners; (2) Financial status that makes it possible to repay
borrowings through the corporate entity's assets and earning power alone; (3) Appropriate information disclosure tofinancial institutions.
○ Although the percentage of loans with a personal guarantee provided by business owners is gradually falling, 70% of
new loans from private financial institutions still come with a personal guarantee provided by business owners.

Trends in the number of loans with personal guarantees provided by business owners,
as a percentage of new loans classified by financial institution
（%）

100

88.1

90
80

81

70

76

85.8

83.5

78.5

68

60

80.9
75

66

64

50

76
61

72.8
69
62

71
70
53

71 Credit guarantee corporations
67 Private financial institutions

48 Government financial institutions

40
30
20

2014

2015

2016

2017

2018

2019

2020

2021

2022

Note: Figures for FY2022 are actual numbers for the first half of the year (April – September).
Source: Statistics for the utilization of Guidelines for Personal Guarantees Provided by Business Owners in government financial institutions and statistics for the utilization of Guidelines for Personal
Guarantees Provided by Business Owners in credit guarantee corporations, provided by the Small and Medium Enterprise Agency, and statistics for the utilization of Guidelines for Personal
Guarantees Provided by Business Owners in private financial institutions provided by the Financial Services Agency

23

Issues with Personal Guarantees Provided by Business Owners○ According to a questionnaire conducted on business owners of SMEs, nearly half pointed out that thenegative impact of a personal guarantee provided by business owners on management would delay
undertaking business revitalization in the early stages.
Impact of the provision of management guarantees
（％）

20

30

40

50

前向きな投資やSuppressionofpositive事業展開がinvestment
and business
抑制されてしまうdevelopment

51

早期の事業再生への
Delays in undertaking
business 着手がrevitalizationin the early stages
遅れてしまう45

新規融資などの
Increaseddifficulty ofreceivingnew credit
新たな信用供与がfacilities such as new loans
受けにくくなるRefrainfrom timely and
金融機関へのappropriate information
適時・適切な情報提供を
provision to financial
institutions
控えるようになる

60

35

25

Note: The survey was conducted on SMEs and micro enterprises whose main banks are regional banks, N=9,371. The survey period was March 2019.
Source: Prepared based on Financial Services Agency, "Questionnaire Survey on the Evaluation of Efforts by Financial Institutions (2019)"

24

Motivations for Being Founding○ Among startups in Japan, the primary motivation for being founding is “Want to solve social issues
and be useful to society.”
Motivations for being founding
Multiple answers accepted (Valid responses: 126)

Want to resolve social issues and be useful to society
Want to utilize one’s own ideas, knowledge, and skills
Had a friend with the same intentions, recommended by a friend
Want to produce financial results
Unable to utilize one’s own ideas and research results in their former organizations
Aspired to be an entrepreneur since youth
Impact of parents/relatives (parents/relatives are managers of startups, etc.)
Inspired by the stories of others (lectures, etc.) or books
Other( ) indicates the numberof valid responses

Note 1: In 2022, an online questionnaire survey was conducted from May 10 – June 15, 2022, on venture companies within five years of establishment.
Note 2: “Want to resolve social issues and be useful to society” ranked first in 2020 (72.3%) and in 2021 (73.7%).
Source: Venture Enterprise Center, “VEC Yearbook 2022”

25

International Comparison of the Composition of Household Financial Assets○ Cash and deposits make up more than half of household financial assets in Japan, and the percentage ofmarketable securities is low compared to Europe and the U.S.
Comparison of the composition of household
financial assets in Japan, U.S., and UK

Japan

U.S.

Other,
3.0%
Pensions,
7.7%
Of which,
indirectholdings of
DC, iDeCo,
0.5%)

Insurance,
18.7%

Cash anddeposits,
55.2%

Other stocks,
etc., 3.7%
ListedInvestment
stocks,trusts,6.1%
4.3%

Insurance, Other, 2.7%
1.6%
Cash andPensions,
deposits,
26.9%
12.8%
Of which,
indirectholdings of
DC, IRA,
18.3%)

Other stocks,
etc., 12.8%

Bonds, 2.6%

Investment
trusts, 13.1%

Listedstocks,27.5%

Bonds, 1.3%

<Total household financial assets>
2,023 trillion yen<Percentage of listed stocks, investment trusts,
bonds>
Direct holdings 11.6％
12.3%+Indirect holdings of DC, iDeCo: 0.6%

UK

Other, 4.4%

<Total household financial assets>
US$118.2 trillion (13,358.4 trillion yen)
<Percentage of listed stocks, investment trusts,
bonds>
Direct holdings 43.2％
61.5%+Indirect holdings of DC, IRA: 18.3%

Insurance,
10.5%
Cash anddeposits, 27.2%
Pensions,
41.6%(Of which,indirectholdings of
DC, 14.4%)

Bonds,
0.3%

Investment
trusts, 4.3%
Listed stocks,
4.1%
Other stocks,
etc., 7.6%

<Total household financial assets>
7.6 trillion pounds (1,173.1 trillion yen)
<Percentage of listed stocks, investment trusts,
bonds>
Direct holdings 8.7％
23.1%
+Indirect holdings of DC: 14.4%

Note: Figures for Japan are as of the end of December 2022. However, the indirect holdings of DC and iDeCo are on the basis of amount held as of the end of March 2022. Figures for U.S. and UK are as of the end of 2021. Converted
at US$1=113 yen, 1 pound=154.8 yen (as of the end of December 2021).
Source: Figures for Japan were prepared based on materials from the Bank of Japan and DC Provider Liaison Council. Figures for U.S. and UK were prepared based on materials from the Japan Securities Dealers Association, basedon FRB, ONS, IA, and NEW FINANCIAL.

26NISA Usage Status○ Since the launch of the NISA system, the number of users has increased steadily. There are
currently 17.79 million accounts and one in seven citizens has an account.
○ Looking at the amounts, ordinary NISA accounts make up a large percentage.
NISA usage status

1,400

31

Ordinary
1,200
NISA

19

26

104

35
189

303

518

587

15

10

5

End
March 2022
2022年3月末

End 2021
2021年末End 2020
2020年末End 2019
2019年末End 2018
2018年末End 2017
2017年末End 2016
2016年末End 2015
2015年末End 2014
2014年末

200
0

3.0

6.4

9.4

End 2016
2016年末825

988

1,175 1,220 1,247 1,112
1,061 1,099 1,150

12.5

0.69

0.30

0.09

0.03

Ordinary
NISA

End 2014
2014年末

600

0.07

End
2015
2015年末

800

0

0.17

20

0.12

1,000

400

25

15.6

End 2018
2018年末

1,600

80

17.9

20.7

24.0

25.3

End
March 2022
2022年3月末

Installment-type
NISA
45

72

End 2017
2017年末

1,800

Junior NISA
0.56
Installment-type 0.47
1.80
NISA
1.53
0.25

30

End 2021
2021年末Junior NISA

2,000

Breakdown and trends in NISA purchase amounts

End
2020
2020年末(Trillion yen)

(100,000 accounts)

End
2019
2019年末Breakdown and trends in number of NISA accounts

Note: As accounts opened before the introduction of Individual Number Card and whose period of tax-exempt holding periods have ended were deemed to be abolished with effect from January 1, 2022, the number of accounts was
lower than at the end of December 2021.
Source: Financial Services Agency, "Survey on the Usage Status of NISA Accounts"

27

Willingness to Purchase Financial Products After Receiving Advice○ When asked “Would you want to purchase risky financial products if there was someone who could give you
advice or help you with the procedures while understanding your point of view?", 50% of those in their 20s and
40% of those in their 30s, and an overall average of 25%, responded that they would like to make a purchase.
Willingness to purchase financial products after receiving advice
0%

10%

Total
全体

20%

60%

70%

35.4
39.9

42.5

33.5

54.2

12.3
Yes (want to

購入したいと思う
purchase)

100%

32.4

33.2

31.3

90%

23.9

27
29.1

17.7

80%
33.7

41.3

38.5

40代
40s

above

50%

49.1

30s
30代

60s and
60代以上

40%

24.9

20s
20代

50代
50s

30%

No (do not want to

購入したいと思わない
purchase)

Do not know
分からない

Note: Responses to the question " Would you want to purchase risky financial products if there was someone who could give you advice or help you with the procedures while
understanding your point of view? " Targeted at respondents who answered, "Because I have no knowledge about asset investment," "Because I am worried aboutpurchase/ownership," Because it is troublesome to purchase," "Because I am usually busy/have no time," "Because it is troublesome to be solicited;" 1981 cases.
Source: Financial Services Agency, "Results of Customer Awareness Survey on Sales of Risky Financial Products" (June 30, 2021)

28