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‘Abenomics’ returns spotlight to Japan

by Sayuri Daimon

Staff Writer

Takeshi Niinami, CEO of Lawson Inc., remembers how Japan captured the attention of world leaders gathered in Davos a year ago.

Niinami along with economic and fiscal policy minister Akira Amari and industry minister Toshimitsu Motegi was attending a private session on Japan held on the sidelines of the annual meeting of the World Economic Forum. Although it was the last day of the Davos conference, which fell on a Saturday, many prominent figures, such as American business magnate and investor George Soros, stayed on for the session and listened to them discuss the impact of the so-called “Abenomics.”

“I’ve been attending the Davos conference for the past several years, but that was the first time Japan attracted such huge attention. By attending Davos, you know which country is the center of world attention and you understand geopolitics,” Niinami, who is a regular at Davos, said ahead of this year’s annual meeting, which kicked off Wednesday.

Niinami said Japan’s strong presence in the world is highly important for Japan-based companies. For a long time, Japan had been described as having a revolving door for prime ministers, but the emergence of Shinzo Abe and the success of Abenomics have drastically changed such a pessimistic view of Japan.

“It’s all because of Abenomics that many participants began to pay attention to Japan,” he said. “It is important for private companies to ride the strength of this tail wind and utilize it for their business.”

The Lawson CEO said that the first and second arrows of Abenomics have so far been successful, and the focus has shifted to how to implement his third arrow.

The first arrow emphasized massive monetary easing and the second arrow entailed a sharp increase in short-term fiscal expenditure, especially investment in infrastructure projects. Abe’s third arrow is a long-term growth strategy.

“Abenomics has created an environment in which companies can take initiatives in doing business, now that we have a favorable environment, company CEOs must leverage this momentum and drive the growth of our economy further,” Niinami said, referring to the Industrial Competitiveness Enhancement Law, which the Diet passed last month and was expected to be enforced Jan. 20. It aims to change the Japanese economy, which is distorted by overregulation, underinvestment and delays in consolidation.

Under the law, the government will create a system where a special provision will allow companies on an individual basis to be exempt from specific regulations if related ministers approve business proposals by such companies.

Niinami said new business ideas can be implemented even in the convenience store industry. For example, Lawson can connect doctors or pharmacists at call centers with its customers and offer minimum medical services, such as providing blood tests or advice on medication via TV screens installed at Lawson stores. Taking advantage of its 24-hour operation, customers can communicate with doctors without going to a hospital.

Such a business idea may become a reality if the government gives it the green light. Niinami believes if one company begins such a service, it will trigger innovation in other sectors. “Competition will spark more innovation, and the advancement of information and communications technology will also support this,” he said.

Niinami also said the Japanese economy needs to depart from its traditional structure of focusing on manufacturing sector growth and the long-standing tax system that is based on the premise that women stay home to take care of their families.

Japan’s economic engine has long relied on the manufacturing sector, but such a period is over, Niinami said. “Now, we are living in a society where the service sector will pull the economy and to do that, we need further deregulation,” he said.

The tax system should also be changed to encourage women to work outside households, he said. In Japan, if a wife earns more than ¥1.03 million a year, she will no longer be a dependent of her husband and will have to pay tax according to her income. Once the salary reaches ¥1.3 million, she will not be covered by her husband’s health insurance and pension. As a result, such a system has prompted many women to stay home and be dependents.

Niinami, who also serves as vice chairman of the Japan Association of Corporate Executives, welcomed Japan’s winning bid to host the 2020 Olympics and Paralympics, and called it the “fourth arrow” for economic revitalization.

“We can create something that the young generation can look forward to. With the Olympic and Paralympic Games, young people will have a dream,” said Niinami, who led the business association’s support for the 2020 Games.

Once Japan starts to move forward to prepare for 2020, people’s mind-set will change. To win as many gold medals as possible, Japan will begin thinking of ways to nurture young athletes and such a competitive mentality will make Japan strong, he said. He also mentioned that with a clear target and time frame, Japan can exert the aggregate power of its people and strive to achieve such a goal. Uniting efforts to meet a deadline is one of the strengths of the Japanese people, he said.

The Olympics and Paralympics in 2020 will initiate many changes.

“More people will need to speak foreign languages such as English and Chinese, and various signs on streets and stores will be improved to assist foreign tourists. Japanese towns and cities will transform into ones that can express hospitality,” he said.

While it will boost the nation’s tourism beyond the Tokyo metropolitan area, towns and cities will also change to have more innovative designs, such as introducing universal designs to cope with the aging society, he said.

Download the PDF of this Davos Special 2014