Hiroaki Nakanishi, chairman of Hitachi Ltd., has been tapped as the next leader of Keidanren (Japan Business Federation) at a time when the nation’s economy and its companies stand at a critical juncture amid a rapidly changing business environment in a variety of sectors. There are hopes that Nakanishi’s past success in achieving the giant electronics and machinery group’s turnaround from its late 2000s crisis may help the top business lobby play a key part in Japan overcoming its various economic challenges. But for that to happen, Keidanren under his leadership should be leading the discussion for reforms, instead of just going along with the government’s policies in order to maintain close ties with the administration in power.

Keidanren comprises about 1,300 big companies and industry organizations as its members. Its predecessor was established in 1946 with the aim of leveraging the business community’s influence over the government’s economic policies by making policy proposals. At its apex Keidanren is believed to have wielded such strong influence that the position of its chairman — served by a succession of top executives from Japan’s top-notch firms — was often likened to “prime minister” of the big business circles. Much time has passed, however, since the presence and influence of the organization, along with the prestige associated with being its chief, was deemed to have declined as the nation’s economic landscape changed.

Nakanishi, who will become Keidanren chief in May, is credited for Hitachi’s comeback from its crisis during the global recession following the 2008 collapse of Lehman Brothers. First as vice president and then as president, Nakanishi oversaw Hitachi’s rebound from the ¥787 billion loss the group incurred in the business year to March 2009 — the largest for a Japanese manufacturing firm at that time — by restructuring the group’s business, pulling out of loss-making sectors and shifting resources to areas in which it was competent.

Today, many of the nation’s major companies bask in record profits — aided by the weak yen and robust demand in overseas markets. But prospects for the domestic market remain clouded with the graying and declining population. Meanwhile, rapid changes are afoot in various sectors that could transform the landscape, such as, for example, the shift toward electric vehicles and the development of self-driving technology in the automobile industry. Such changes provide opportunities, but they also bring tough competition. And slow responses to such changes risk allowing rival companies to dominate the market. Japanese companies should embrace the changes and aggressively spend their resources in areas where they see future growth.

Keidanren should take the lead in shaping this aggressive mindset among Japan’s business executives — particularly among the manufacturing firms that make up a large portion of its members — and Nakanishi, with his experience with Hitachi’s turnaround, should play a key role.

Japan’s manufacturing industries were also recently hit by a spate of scandals that threaten to erode international confidence in the “Made in Japan” brand, such as product data falsification by Kobe Steel and several other leading manufacturing companies. Nakanishi’s key tasks as Keidanren chief should include leading the efforts to get to the bottom of these problems, fix what lies behind the lapses and take steps to make sure that they won’t be repeated.

Keidanren has traditionally maintained cozy ties with Liberal Democratic Party-led governments. But its relations with the administration of Prime Minister Shinzo Abe were strained while the organization was led by Hiromasa Yonekura of Sumitomo Chemical, who openly criticized the prime minister’s Abenomics policies. The relationship is believed to have improved significantly under Yonekura’s successor and current Chairman Sadayuki Sakakibara, who maintained close ties with Abe during his four-year helm of the organization that will end in May. Nakanishi is also counted among the prominent business leaders close to Abe — which is said to be one of the key reasons he was tapped for the post of Keidanren chief.

However, Keidanren would not be playing the role expected of it if it maintains its close relationship with the government for the sake of protecting the business sector’s own interests. On economic policies, there will be occasions for the business organization to differ from the government from a long-term perspective, whereas the administration in power tends to be influenced by near-term performance of the economy and impact on votes in elections. And when it does, it should not hesitate to make the point clear to the government. Keidanren leaders should realize that it’s their role to do so.

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