I am pleased to extend warm greetings to all of you at the beginning of the New Year.
I was appointed Minister of Economy, Trade and Industry in last year’s reshuffling of the Cabinet. This is the second time for me to be responsible for economic and industrial issues; the first was when I served as the Parliamentary Vice-Minister of International Trade and Industry 16 years ago. With a firm understanding of the current state of the Japanese economy, I will focus my efforts and devote all my energy to addressing the multiple challenges facing Japan’s economy and society. I would like to ask for your continued support and cooperation this year.

• Flexible economic measures in response to the economic situation
• Measures to promote stable realization of the New Growth Strategy
• External economic policies
• Environmental and energy policies
• Measures for SMEs
• Conclusion

“Three-Step Economic Measures”

Before the Japanese economy reached the point of self-sustaining recovery, the rapid appreciation of the yen and a slowdown in overseas economies led to it remaining stagnant for an additional period. Furthermore, there are risks that may put downward pressure on the economy. To overcome this harsh economic climate, the government has implemented a number of measures, including the establishment of “The Three-Step Economic Measures for the Realization of the New Growth Strategy,” taking ¥920 billion from reserve funds, and formulating a ¥5.1 trillion supplementary budget.

Step 1

Step 1 in the above policy package is emergency action to combat the yen’s appreciation and deflation. Step 1 efforts by the Ministry of Economy, Trade and Industry (METI) include the launch of a support program worth ¥110 billion to motivate job-creating domestic low-carbon industries to locate in Japan, and projects to assist young people with their job search. These measures are aimed at establishing a solid foundation for employment and investment.

Step 2

Step 2 consists of swift and flexible action based on current economic and employment conditions. As part of this, METI has formulated a program that includes financing support for small and medium enterprises (SMEs), “eco-points,” and other incentives to foster near-term demand; acceleration of measures and R&D projects associated with rare earth issues; and assistance to attract innovation centers to Japan. Various policies have been implemented toward these goals, such as stimulating SMEs and regional economies, promoting the New Growth Strategy, and building a platform for medium- to long-term growth. Through steady and prompt implementation of these policies, METI will do its utmost to shore up the economy and ensure its recovery.

Step 3

Now I would like to address economic measures for the next fiscal year. Step 3 is the phase of full implementation of the New Growth Strategy, and it views FY 2011 as the year for Japan to aim for medium- to long-term economic growth generated by employment creation, as well as an exit from deflation.

Establishment of the Inward Investment Promotion Program

With this goal in mind, METI has been particularly focusing on the establishment of the “Inward Investment Promotion Program,” a strategy to promote inward investment and create new jobs. The industrial and labor sectors, and the national and local governments, held joint discussions and successfully identified challenges and solutions for respective sectors. The government declared that it would promote “pro-growth” policies, and committed to building world-class infrastructure for investment and business, as well as increasing demand and the number of attractive investment destinations.

Five percent corporate tax cut and tax incentives to make Japan “Asia’s center for business”

During compilation of the Outline of Tax Reform, the government decided to cut the corporate tax rate by 5 percentage points in a manner that in practice reduces the burden on companies, as the first step toward revision of the statutory corporate tax rate, which is a key policy element of the New Growth Strategy. At the same time, the government stated clearly that it would establish a tax incentive program to make Japan “Asia’s center for business.” This is a decision to provide bold tax incentives to encourage global enterprise to locate R&D sites, which are effective in creating employment and enhancing investment, in Japan.

Expectations for inward investment and increased employment

These are measures that the government has pledged as part of the Inward Investment Promotion Program, and they consist of policy-oriented tax measures aimed at achieving economic growth and employment security. I expect that leaders in the industrial sector will shift from “defensive management” to “aggressive management,” and proactively make domestic investments and provide high-quality jobs.

WTO Doha Round Negotiations

The next topic is external economic policies. As a country with limited land area and scarce natural resources, Japan must inevitably engage in foreign trade if it desires to become affluent as a nation. To ensure its citizens enjoy continued economic affluence and security, Japan must prevent protectionism and promote free trade. At last year’s APEC meeting in Yokohama, I advocated contribution to the conclusion of the WTO Doha Round negotiations and resistance to protectionism. The meeting ended with declaration of “The Yokohama Vision,” which reaffirms that 2011 will be a critically important “window of opportunity” for the conclusion of WTO negotiations. METI will strive to bring them to a successful conclusion.

Promoting economic partnerships

While stressing adherence to international trade rules, Japan should absorb the vitality of growing foreign countries by actively engaging in negotiations and information gathering related to bilateral economic partnerships. In November of 2010 the government laid out and received Cabinet approval for the “Basic Policy on Comprehensive Economic Partnerships” as its fundamental policy in promoting economic partnerships with major countries and regions. This was a step toward the establishment of high-level economic partnerships in line with global trends, based on a determination to “open the country.”

Strengthening domestic agriculture

At the APEC meeting in Yokohama, member economies agreed to take steps toward realization of a Free Trade Area of the Asia-Pacific (FTAAP). However, implementation of this agreement is indeed predicated upon enhanced domestic measures in each country and, for Japan, upon public understanding. Given the necessity of strengthening agriculture, forestry, and fisheries in Japan in order to promote economic partnerships, METI organized the “Working Group on Industrialization of Agriculture” and commenced debates on issues such as export promotion and collaboration between agriculture, commerce, and industry. Through this Working Group, METI aims to actively devise and implement ideas for strengthening agriculture, such as promoting agriculture as the “sixth industry” and increasing foreign demand for Japanese agricultural products.

Exporting infrastructure and systems

METI also realizes the importance of exporting products and parts in packages in the form of social infrastructure or systems, instead of exporting them separately. For example, in the area of nuclear energy, Japan, led by International Nuclear Energy Development of Japan Co., Ltd., has successfully reached an agreement with Vietnam on a nuclear power plant construction project there. During the Japan-Arab Economic Forum, Japan agreed with Morocco and Tunisia on projects related to solar power. I attended this forum and realized that Japan’s technological and industrial capacity is a focus of strong interest and expectation among foreign countries. In cooperation with the private sector, METI will accelerate the international development of Japanese industries in such fields as water, rail, expressways, and satellites, by helping them increase competitiveness, enhancing financial support, and conducting high-profile diplomacy.

Securing rare earths and other natural resources

Now I will discuss environmental and energy policies. Last year’s widespread discussions on rare earth policies have reminded us of the importance of having a stable supply of natural resources. I responded to the rare earths problem by requesting China to quickly improve the movement of goods, while taking proactive measures to broaden the range of importing countries, including supporting overseas mines development and exploration primarily through JOGMEC. In addition, we will do our best to develop recycling technology as well as alternative materials to rare earths. Taking a medium- to long-term view, METI will strive to ensure a stable supply of mineral resources, as well as oil, natural gas, and coal.

Strengths in the environment and energy fields

The environment and energy are two growing sectors where Japan can leverage its strengths. It is essential to promote green innovation as a driving force in the New Growth Strategy. METI will encourage field trials and technology development, aimed at further refinement of Japan’s energy-conservation and low-carbon technologies, and facilitate the international expansion of these technologies.

Promoting nuclear energy and renewable energy

Another area with a high potential for growth is eco-friendly and sustainable energies, such as nuclear energy and renewable energy. METI continues to focus on the promotion of nuclear power generation and nuclear fuel cycle development, with safety assurance as the primary precondition, and aims to disseminate renewable energy by introducing a feed-in tariff scheme.

Climate change tax

After extensive discussions on a climate change tax, in order to search for ways to win support from industry and the public amidst today’s difficult economic conditions, the government has reached a definite plan that the tax be imposed in the form of incrementally increases to fossil fuel taxation. The government will use the revenues from this tax in support of policies effective in curbing energy-originated carbon dioxide emissions, while fostering public understanding.

 Actions at COP16

At the front of international efforts to combat global warming, Japan clearly opposed a simple extension of the Kyoto Protocol at COP16 late last year. By giving concrete shape to a bilateral credit scheme and other mechanisms to reduce carbon dioxide emissions worldwide, METI continues to pursue a truly fair and effective framework in which the U.S., China, and India all participate.

Further reducing the corporate tax rate for SMEs

The final topic is measures in support of SMEs. SMEs account for 99.7% of Japanese companies and 70% of domestic jobs. Invigorating this sector will revive the engine of the Japanese economy. To facilitate the development of SMEs, the government decided in its Tax Reform Plan to cut the reduced corporate tax rate applicable to SMEs to 15% in the next fiscal year, from the current 18%.

Providing financing assistance and supporting highly motivated SMEs

Amidst the ongoing severe economic climate, METI will not only ensure financing for SMEs through loans and guarantees provided by public financial institutions, but also extend every possible support to SMEs eager to develop human resources, promote technology development, and launch new businesses.

Supporting overseas business expansion

In cooperation with Regional Bureaus of Economy, Trade and Industry and related agencies, METI will provide detailed assistance to SMEs in dispatching missions overseas and exhibiting at trade fairs abroad, particularly under the initiative of the “SME Overseas Operations Support Council,” which was organized last year. I recently had the opportunity to visit some SMEs and get their direct input. In light of this input and other factors, I decided that METI, together with the Financial Services Agency and the Ministry of Finance, would establish a scheme in which regional banks cooperate with JETRO (Japan External Trade Organization) and JBIC (Japan Bank for International Cooperation) to support SMEs’ overseas operations. This will include setting up “Japan Desks” in foreign countries to offer Japanese companies operating there consulting services in Japanese. I will ensure that this scheme is carried out through joint efforts of relevant institutions.

I am confident that effectively implementing these measures one by one will result in a solid step toward revitalizing Japan’s economy and industry. Throughout this year, I will work as hard as possible to create a society where each citizen can live his or her life with peace of mind, and a country where people can have dreams and aspirations for the future. I would like to conclude my New Year’s message by offering all of you my sincere hopes for the best of happiness and health, both this year and in years to come.

January 1, 2011
Akihiro Ohata
Minister of Economy, Trade and Industry