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With the economy remaining motionless, the nation should battle for structural reforms that will restart economic activity and nurture “innovative development,” the Economic Planning Agency said in its monthly and annual reports released Friday.

The economy is largely a prisoner of lower corporate capital investment and rising joblessness, according to the agency’s report for the month of July.

Based primarily on data from May, the report says conditions are regressing with increased deterioration in trade, housing starts, corporate earnings and other areas.

The report also gives a negative outlook on consumer spending, a portion of the economy that accounts for approximately 60 percent of Japan’s GDP.

Regarding solutions, the EPA advises the nation to grapple with structural reform to pull Japan out of its slump and lay a foundation for what it calls innovative development.

The 472-page volume, titled “Laying the Groundwork for Innovative Development,” is the agency’s 51st annual report.

Under traditional systems, manufacturers benefited from the so-called lifetime employment systems, a plethora of rigid regulations, pay scales based on seniority, and a consensus-oriented management system that ran from bottom to top. But such systems are inadequate for a rapidly changing business environment, the annual report says.

Without new systems, the future of life and business will be saddled with uncertainty and lead consumers to save rather than spend, it says. This will in turn guide businesses to take more conservative stances on new opportunities.

The report also criticizes the dearth of fundraising mechanisms for businesses to raise money, citing the ongoing tight-fisted lending by Japanese banks. The nation’s traditional socioeconomic system, the fiscal 1998 white paper says, is riddled with “structural fatigue” and needs replacement.

To tackle structural weaknesses, the report recommends an urgent effort to change the Japanese economic system into a competitive, market-oriented machine that operates “on the principles of equal opportunity, self-responsibility, disclosure and prudent observance of rules.”

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