New Year Greetings 2019 - Hiroshige Seko, Minister of Economy, Trade and Industry

• Introduction　
• Realizing “Connected Industries”　
• Trade and external economic relations　
• Support for SMEs and micro-businesses and measures to mitigate the impact of the new consumption tax system　
• Realizing a social security system that equally benefits all generations　
• Implementation of energy policy　
• Reconstruction of Fukushima　
• Final remarks　

Introduction

I would like to wish you all a Happy New Year in 2019.

Over the past 30 years, economic and social structures have changed drastically. This change is still continuing, like a surging wave that moves everything it touches.

For example, the competitive environment facing firms is changing dramatically. Due to the Fourth Industrial Revolution, AI (artificial intelligence), IoT (internet of things), and robotics have come together to produce a new cyber-physical world. We see an increase in businesses integrating goods and services across various industries – rather than merely selling goods manufactured in individual industries as has traditionally been the norm – by taking advantage of these new technologies. Moreover, the shift in consumer mindset from ownership to sharing, as highlighted by the rise of the sharing economy, will inevitability result in change to existing business models.

The environment surrounding trade policy is also changing considerably. Many countries are confronted with the trilemma of how to reconcile globalism, nationalism, and democracy, and have been forced to engage in a difficult balancing act in policy management in terms of diplomacy and domestic politics. Under these circumstances, protectionism is spreading globally and trade friction and other problems are occurring. And, at the same time, there are emerging fields in which it is necessary to establish new international frameworks, including trade in data and e-commerce.

Furthermore, there is an urgent need to address environmental and demographic changes. In order to do so, economic and social infrastructures will need to adapt. For example, the Paris Agreement, which will be put into force in 2020, aims to reduce greenhouse gas emissions to zero on a net basis in the latter half of this century, making it necessary to develop energy policies that seek de-carbonization more strongly than before. Many developed countries including Japan are also facing declining birth rates and the aging of society, resulting in shrinking labor forces and the need for productivity improvement.

This surging wave of change across economic, political, and societal spheres will require clear-eyed visions as we sail forward into 2019 and beyond. Therefore, the Ministry of Economy, Trade and Industry (METI) will implement the following five major initiatives:

Realizing Connected Industries

First, METI will support companies capable of surviving the changing competitive environment and leading the world. There are four important points concerning this effort.

We must realize the Connected Industries concept. Under this concept, industries will create new added value and develop the solutions to various societal challenges through creating connections between various facets of modern life, including people, goods, technologies and industries. For example, although it is said that Japan has an advantage in “monozukuri” (manufacturing skills at the factory-floor level), the Japanese manufacturing industry is facing a serious labor shortage. By introducing such technologies as AI and IoT at the factory-floor level, the manufacturing industry will promote human resource development and transfer of skills to younger generations.

We have identified five priority fields to be tackled under “Connected Industries” and have been advancing data sharing and AI-based data utilization in those fields. We will continue to promote data linkage through corporate tax reduction for IoT investments, among other measures.

Next, we must develop the basis for data utilization, for example, by training IT-skilled workers and cybersecurity experts. Regarding training of IT-skilled workers, we will promote recurrent education for professionals with respect to such matters as data science and cybersecurity by making use of a program to authorize lecture classes that assist the acquisition of skills required by the Fourth Industrial Revolution. We will also develop guidelines for ensuring cybersecurity throughout entire supply chains and promote practical application of the guidelines in industries.

It is also essential to create startups that can play a leading role on the global stage. We will select startups that possess promising technologies and provide excellent services to be “J-Startups” and support their global expansion by assisting them in forming partnerships with major companies and exhibiting their businesses in startup events in and outside Japan. We will also further open government procurement in order to allow more startups to serve as suppliers — until now, the inclusion of startups has been limited — thereby giving startups more business opportunities.

Finally, we will enhance systems related to intellectual property rights. Responding to the arrival of new technologies and a market shift to services, we will enhance the protection of new designs, including images posted on the internet, and strengthen the intellectual property-related litigation system in order to make even larger contributions to the promotion of innovation by startups and other companies.

Trade and external economic relations

Second, Japan will implement various initiatives in order to develop a free and fair international business environment against the backdrop of the increasing protectionist momentum worldwide due to domestic political and economic issues.

We aim to further expand an agreement on the Trans-Pacific Partnership (TPP) 11. In addition, we will actively support efforts by small and medium-size enterprises (SMEs) and middle-ranking enterprises to achieve overseas expansion by taking advantage of economic partnership agreements (EPAs), including the Japan-EU EPA, which will be put into force on February 1. Regarding the Regional Comprehensive Economic Partnership (RCEP), we will advance negotiations with the aim of concluding an agreement on the RCEP by the end of this year.

Japan will lead the discussion on the reform of the World Trade Organization (WTO) and the development of rules concerning e-commerce among like-minded members by taking the opportunities of a Japan-US-EU Trilateral Meeting of Trade Ministers and the G20 summit in June this year, which will be chaired by Japan.

With respect to the United States, Japan will further deepen the bilateral relationship by promoting cooperation in the fields of infrastructure, energy and digital economy in addition to further expanding trade and investment.

Regarding China, Japan will seek to strengthen the bilateral economic relationship in a broad range of fields in light of the results of the Japan-China summit meeting. Beginning with the fields agreed to at the Japan-China Forum on Third Country Business Cooperation, which was inaugurated last year, we will promote the business expansion of private-sector companies based on international standards.

With respect to the Japan-Russia relationship, more than 150 private-sector projects have been created under the Eight-point Cooperation Plan, more than half of which have already begun. We will also seek to deepen the Japan-Russia economic relationship by cooperating in improving labor productivity and working together in the field of digital economy.

Support for SMEs and micro-businesses and measures to mitigate the impact of the new consumption tax system

Third, we will support SMEs and micro-businesses facing serious challenges, such as the aging of top managers and labor shortages.

Following the drastic expansion and enhancement of the business succession tax system for corporations, this year, we will establish a program to reduce to zero the burden of the gift and inheritance taxes concerning business succession for owner-managed businesses, which will remain in effect for a limited period of 10 years. We will also continuously implement a broad range of initiatives that contribute to productivity improvement, including supporting capital investment, introduction of IT tools, and development of new sales channels.

Based on the many natural disasters last year, we will implement support measures, including tax system and budgetary measures, with an eye to the enactment of relevant legislation in order to encourage business operators to take disaster prevention and mitigation measures.

On October 1 this year, the consumption tax rate is scheduled to be raised from the current 8% to 10%. We will take every possible measure to avoid disruptions to people’s everyday lives and economic activity.

Specifically, we will widely disseminate the guidelines for pricing under the new consumption tax system, which was released in November last year. In addition, in order to prevent a decline in demand, we will support SMEs and micro-businesses with respect to adaptation to cashless payment and loyalty point programs and also provide support measures for shopping streets. Moreover, in order to support SMEs and micro-businesses to smoothly acclimatize to the new consumption tax system, we will implement a subsidy program for the introduction of new cash register systems and conduct awareness-raising and public relations activities. In addition, we will ensure appropriate transfer of increased consumption tax in business-to-business transactions by increasing the number of inspectors responsible for preventing companies from refusing to make additional payments equivalent to the consumption tax increase.

Realizing a social security system that equally benefits all generations

Fourth, in order to respond to social structural changes, including population decline, we will contribute to the government-wide initiative to realize a social security system that equally benefits all generations. In September last year, we established the 2050 Economic and Social Structure Committee under the Industrial Structure Council and started discussions on the promotion of the development of opportunities for elderly people to make active social participation and of the employment of mid-career workers, and also the promotion of insurers’ efforts to prevent lifestyle diseases and dementia. We will cooperate with the Ministry of Health, Labour and Welfare in realizing a social security system that equally benefits all generations through discussions at the Council on Investments for the Future.

Implementation of energy policy

Fifth, we will develop an energy policy which flexibly responds to and ensures resilience against disruptions. Based on the lesson of the massive power failure caused by the Hokkaido Eastern Iburi Earthquake, we will establish a resilient energy supply system by implementing various measures, including strengthening linkage between regional power grids and introducing self-power generation facilities into fuel supply infrastructure.

Next, the fight against global warming is also important. In order for Japan to lead a global shift to new energies and de-carbonization by realizing a virtuous cycle between the environment and economic growth, it is essential to create innovations that go beyond the limits of existing technologies. We will develop a long-term growth strategy based on the Paris Agreement with a resolve to achieve the following objectives: invigorating green finance by making visible companies’ decarbonization initiatives; and contributing to the reduction of global emissions of greenhouse gases by promoting overseas expansion of products and technologies with better environmental performance.

To that end, innovation achieved through new technology is essential. Regarding hydrogen energy technology, a field in which Japan is the global leader, we held the world’s first meeting of hydrogen energy ministers in Japan in October last year in order to promote technology development and the review and revision of regulations in cooperation with other countries and issued the Tokyo Declaration. With respect to renewable energy, we will implement a new initiative to promote offshore power wind generation based on a new law enacted last year, with a view to developing offshore wind power into a major power source. Regarding nuclear power, we will promote innovations that will realize enhanced safety through cooperation between the public and private sectors in consideration of trends in technology development abroad, including the development of small reactors.

Reconstruction of Fukushima

Regardless of the changing times, the reconstruction of Fukushima, as well as the safe and steady decommissioning of Fukushima Daiichi Nuclear Power Station and contaminated water management, continues to be the top priority for METI. With respect to the decommissioning and contaminated water management, based on the Mid-and Long-Term Roadmaps, we will continue to place the top priority on ensuring safety and emphasizing risk reduction. At the same time, we will proceed with those measures while further enhancing communication with local communities and the wider society.

The evacuation order has already been lifted in most areas, with the exception of the "difficult-to-return" zones, and even in those zones where the order remains in place, efforts to build new communities have started, indicating that reconstruction and renewal activities are steadily making progress. In order to ensure that these moves lead to full-fledged reconstruction of Fukushima, rebuilding residents’ lives and reviving industries are essential. We will continue to provide unwavering support for the reconstruction of businesses and livelihoods through the Public-Private Fukushima Soso Reconstruction Joint Team and develop new industrial infrastructure by promoting the Fukushima Innovation Coast Scheme.

Final remarks

In November last year, it was decided that World Expo 2025 will be held in the Osaka, Kansai. Going forward, nationwide efforts will be made to prepare for the Expo, with the government, local communities and business circles working together toward a successful hosting of the event. In June this year, the G20 summit will be held in Japan for the first time. There will also be a succession of events that will attract global attention to Japan over the coming years: in September, the Rugby World Cup will be held in Japan, to be followed by the Tokyo Olympics and Paralympics in 2020. This is precisely why it is important for Japan to take a bold step forward and lead the world in tackling the many challenges at home and abroad.

As we live in an era of considerable uncertainty concerning the future, we must move forward with strength and vision. 2019 is the “Year of the Wild Boar” in the Oriental Zodiac. All of us at METI will work as one to move forward with the force and determination of a hard-charging boar. It is my hope that Japan will be successful not only in securing domestic goals but also in a manner that constitutes a great leap forward for the international system.

I appreciate your continued understanding and support.

January 1, 2019
Hiroshige Seko
Minister of Economy, Trade and Industry