As for the reasons why the weight is placed on domestic business investment, the companies which answered "the advantages of domestic business development are increasing (such as productivity and protection of confidential information and know-how)" accounted for 42.4%. While there may be an influence of exchange rate movements, it is necessary for us to sustain the domestic equipment investment and new plant establishments, and to increase domestic employment.

## (In domestic production processes, human resources are required at the stages of creating products and dealing with customers)

As a change in the competition environment surrounding the manufacturing industry, we can point out that the level of manufacturing in Asia has improved through modularization and popularization of 3D CAD, etc. It is pointed out that the value obtained from manufacturing decreased due to this change; however, according to Figure 21, in the midst of such structural change, the companies list product planning, marketing, and R&D, as the business processes they want to enhance domestically and overseas; in comparison with the status 3 years ago, the degree of contribution to value-added has increased within the company, in the processes of product planning, marketing, R&D, providing of services, security and after-the-sale services. Further, there is a sign of increase of regular employees in such business processes, showing that the human resources especially regular employees are needed for value-added in the stage of creating products through production processes and the stage of dealing with customers.

## (Challenges toward strengthening of competitiveness by creation of value-added)

As shown in Figure 22, while creation of value-added is being sought, the companies in the manufacturing company views that their abilities to develop new products and services, diversification of human resources and human resource development system to enhance abilities and qualities are considered important toward the future, in comparison with the current status, as the source of competitiveness. We can say that the importance of diversification of human resources and human resource development is strongly recognized by the companies when they provide new products and services with high value-added; meanwhile, the human resources and skills necessary for the R&D jobs and specialized and technical jobs are changing in line with technological innovation and business restructuring, etc., but the companies still cannot fully deal with the development and securing of such human resources. One reason behind this is that it is difficult for a company alone to deal with the human resource issue due to insufficient know-how and lack of time and budget; it is necessary for us to develop and secure technical human resources through academic-industrial alliances and ability development.

## (Labour productivity declined due to decreased efficiency of labour allocation)

One challenge toward increase of workers' wage income is the increase of labour productivity; as shown in Figure 23, when the factors for labour productivity change are broken down into the change in capital-labour ratio per worker, change in TFP (total factors productivity), and change in labour allocation, we can see that the TFP change ratio and capital-labour ratio consistently contributed at a considerable level, but the contribution by the industrial composition of workers was negative in the 2000s. In the background, it is suggested that the labour allocation was shifted from the industries with high productivity; in the future, it is necessary for us to promote transformation of industrial structure, by creating and maintaining the industries with high value-added and promoting labour mobility without unemployment. As the contribution of the capital-labour ratio to the increase of productivity is declining, we need policy measures to overcome deflation and to promote business investment.

## (It is important to improve terms of trade and to increase wages through improved productivity)

While the real gross national income (GNI) increased during the economy recovery phase from 2002 thanks to net income from overseas, the trade loss due to worsened terms of trade negatively contributed. The terms of trade rapidly worsened in the 2000s, and this is considered to be the reason for the GNI reduction. Under Figure 24, the real wage increase rate, which hypothetically assumes that the labour share ratio remains the same, is broken down into the factor for change in labour productivity and the income outflow effect; due to the income outflow effect associated with trade loss, the increase of labour productivity is reduced, which resulted in the decreased real wage increase rate when it is hypothetically assumed that the labour share ratio remains the same. In order to reflect the efforts for increase of labour productivity to the wages, we should also improve terms of trade by promoting, for example, R&D investment, and ensuring export prices, and reflect the increased productivity to wages.