Essay

New Year's Greeting
Iwao Okamoto
Director-General,Manufacturing Industries Bureau, Ministry of Economy, Trade and Industry
concentrating management resources, not just in individual
firms, but also as far as industrial restructuring. While it wasencouraging to see great progress made in the steel andchemical industries last year, we hope to search for morepotential in a wider range of fields. It goes without saying thatfirms interested in integrating and merging businesses should
be entrusted to make their own management decisions.
However, I believe that it is becoming increasingly urgent todecrease costs while investing bundled resources into strategic
business areas, including R&D. As a branch of the government,
we intend to push a series of reforms on corporate legislationand taxation and the constitution the industrial revitalization
law to create a better environment for enabling related firms toreconstruct their businesses. We also intend to support theefforts of everyone in performing the correct operations.
Secondly, is it not time to shift toward “grow” in the “shrinkto grow” philosophy? Everyone in the industrial world has
strived these past few years to incorporate restructuring during
our lingering recession even with the stiff international
competition. Under the philosophy “shrink to grow,” we wereto endure many hardships of restructuring in order to establish
a foundation from which we could build on for tomorrow.
Creating demand through innovation is even more necessary
now that demand is low throughout Japan’s entire economy. In
order to combat the hollowing of industry, I believe that wemust develop products and processes a step or two ahead ofChina and other countries and put these results in operation
domestically as a standard approach. I am confident that our
manufacturing industries possess the potential to become acentral leader in innovation. Is this not the time to movetoward growth by accelerating R&D investments in order toboldly implement existing seeds and search for future seeds?
To achieve this, I think we must seriously investigate theexpansion of government support for R&D investments,
restoring financial intermediation functions of banks and thelike, and maintaining the capital market. Do we need toreevaluate this viewpoint of marketing workers given only toshrink, i.e. reducing the number of employees to such and sucha number and the balance of interest-bearing debt to such andsuch dollars? What about the views of managers reluctant toshift to a strategy of growth in accordance with this viewpoint?
While realizing that it is not easy to shift toward growth when
considering the current business situation of progressing
deflation and the problem of bad debts, could we ever expect toemerge from this deflationary depression, during this type ofperiod, if all economic players moved in a direction towarddiminishing equilibrium? It is my fervent hope that this year wewill find bright spots in these dark times and have as manychances as possible to discuss the way to act on them positively
and aggressively.
In conclusion, I would like to wish you happiness in all of
your endeavors in 2002. Happy New Year!

I am very pleased to welcome you all to the New Year, 2002.
Looking back over the past year, the opening year of the21st Century can only be described as a turbulent one. Despiteof all the somber news, such as the simultaneous terrorist
attacks on America and the outbreak of Mad Cow Disease inJapan, there was also much encouraging and cheerful news,including the birth of Princess Aiko, the success of baseballplayer Ichiro in America, and the awarding of the Nobel Prize in
Chemistry to Dr. Ryoji Noyori, who became the second
successive Japanese winner after Dr. Hideki Shirakawa.
With the effects of the IT recession in America and theterrorist attacks added to the problem of Japan’s slumping
economy, Japan is now facing fears of deflation, a deteriorating
employment situation, and the problem of disposing massive
amounts of bad loans. In light of this situation, theadministration has come together to incorporate a series ofstructural reforms however, manufacturing industries areprimarily concerned about the rapid shifting of production
bases overseas, or what could be called the “second hollowingof industry.” Manufacturing industries account for one-fourthof Japan’s GDP, while foreign acquisition from their exports
forms the heart of a processing trade country. Moreover,
manufacturing industries comprise more than 90% of private
R&D resources and industrial technologies cannot be developed
when isolated from the manufacturer’s worksite. Therefore,
manufacturing industries literally make up the foundation of acountry that creates science and technology. One after another,
these industries have been shifting production bases to China,
which has held a great attraction recently due to its low
business costs and rapid market growth. Moreover, recent
events have taken on a new aspect in the hollowing of industrial
roots, wherein factories shifted overseas include not only those
producing the finished product, but also those involved in partsand raw materials.
Last November Minister Hiranuma organized a conference
to discuss strategies of industrial competitiveness. The
principle themes evolving from this conference that we areconsidering for future studies are to review the exchange ratewith the Chinese yuan, improve productivity through further
selection and concentration of management resources, improvebusiness efficiency through applications of IT, promote thedevelopment of industrial technology and improve strategies
for intelligent properties, correct high-cost structures, andfurther diversify foreign trade strategies that include the WTOand FTA.
The Manufacturing Industries Bureau intends to participate
actively in a series of discussions, while coming into directcontact with people in the industrial world to get theirunreserved opinions. To mark the beginning of the new year, I
would like to emphasize the following two points from thisstandpoint.
The first point is to further intensify efforts at selecting and2