 Ladies and gentlemen, thank you so much for joining us on this session on Japan. Now we have 45 minutes, and we have three great panelists. Of course, Japan's premier surgeon, Soabe, has a bold plan, a very bold plan. It's a shock therapy for an economy that's been stagnant for 20 years and was overtaken by China in 2010 as the world's second largest abonomics, as the doctrine is known to parts from the piecemeal measures of previous leaders and, of course, focuses on these powerful political constituency. Soabe tells voters that the strong economic medicine he has pursued for more than three years will work. So we have a great panel to discuss the benefits, what more can be done, and the things that need to be stepped up. Mr. Akira Amar, Minister of Economic Revitalization and Minister for Economic and Physical Policy of Japan, thank you so much for joining us. Takishi Ninami, President and Chief Executive Officer, a member of the Board at Centauri Holdings, thank you. And, of course, Adam Pozen of the Peterson Institute. Guys, it's exciting because abonomics has been in the works for three years. Minister, would you like to start and just give us an overview on what you think has worked but what we need to accelerate? Thank you very much. In the past two years, I'd like to explain to you the outcome and the results of abonomics making the specific examples. So in a macroeconomic way, we are getting out of the depression that lasted for 15 years. What important this year is a nominal GDP growth rate was lower than real-term economic growth rate. But now, we are seeing the nominal growth rate is higher than real-term economic growth. This is the wholesome state of the economy. So specific results for Japan, we had a sex that burdens some of the Japanese economy, the high value of the yen and the very high corporate tax rate and also delay in the trade agreements and the very serious labor regulations and also maybe outrageously high levels of environmental risk. And this is a high energy cost and we have these burdens. But now, we are seeing the resolution of that about the high value of the yen. The corporate level is reflecting the Japanese fundamentals. The corporate tax reform taking five years, we are planning to reduce the corporate effective tax down to 20s and we've done it instead of how you do it. But then also, we have the trend of women. In October last year, we came to the overall agreement of taking the October last year. This is the world's largest extent of free trade agreements and the very serious labor researches about the labor dispatch controller and we are trying to put below the level of women and also the measurement in terms of the performance and also the women's compensation in labor force in two years and a half has indicated by the $50,000 we are reducing the risk and also the high level of environmental restriction or regulations. We are trying to make it really less than outrageous and high cost of energy in the liberalization of power and gas market and also we will re-shot the nuclear power plant if we can get rid of these six levels of burdens in terms of the results, regulation reform to break through the hard core regulations. One is the medical care related regulations about the regenerative medicine. Japan is the most advanced and the best in terms of the environment and some of the American regenerative medicine companies are removing their... moving their head of orders to Japan and with the cooperation of companies Teowo and Osaka University, there has been a success for the development of skeletal myoblast cell sheet using the femoral muscle and use it for the patient serious heart failure. There has been actual clinical case and in that case, the heart surge crisis only lay in the past but with this technology, the I.P.S. lab was regenerated in the end of the appropriate and the line. This is also the A.M.D. advanced macular degeneration with the transplantation of... I.P.S. has been successful in those two energies and also the energy the mass production sold about in the base of cars are moving and then the agricultural reform after 60 years and also the PPP the airport of operation right made open to outside and then in the French and Japan airport obtain the operation right of a construction airport and the Osaka airport in conjunction with all this the size of two to a year can I go on a little? There are many specific cases of... So let me talk about corporate governance there are increasing 90% of companies appointing the external directories some more than 90% and the spirit should choose some of the typical Japanese and the institution industries are improving and strengthening social activities. What about going forward? We are talking about the old industrial revolution and Japan will be in the middle of it using IoT and AI and we have the Google, Amazon, Apple, IBM, Google, Amazon, Apple, IBM, GE, Microsoft all taking part in this most specifically for instance the self-driving and leading service is possible in all of the Olympics and in three years also there will be a possibility of using drones and robots the robots to how is already introduced in nursing care facilities and hospital and also introduced in construction as well and the Komatsu production machine has to use the drone for construction site and the survey done by drones and three completion drawings and the end analysis done and advanced AI driven machine thank you minister so the minister was going there through some of the reforms that have been put in place over the last three years Mr. Inami you work in the real economy what kind of impact has it had on corporate spending how much easier is your life now as a CEO? As a matter of fact it's been easier than before and let me put the score to the economics it's still in I think working progress I would say but I like to give credit to the economics for I think I'm changing the overall economy of Japan I mean momentum of the Japanese economy from negative to positive but there are lots of things that need to be done and because we have not got out of the deflation yet completely and people have still inertia in their minds so I strongly believe that it takes at least three to five years to see the efficacies of the policies implemented already by the government so it's been I think a positive but we have to see let's say three to five years but definitely efficacies have been emerging so the prerequisite is definitely the long term and the steady government like the current one and to do so then we can get rid of deflation completely and we must build the solid economy that is resilient to the I think a negative impact of the world economy like recession of China and to enable sustainable growth we must create a domestic demand definitely domestic demand by addressing three issues further more one wages labor and three investment so I think about labor both gentlemen will touch upon definitely creating expectation of continuous wage hike is the most important thing for Japan to raise consumption that's a long term agenda for Japan I think a positive sign has been coming up but still consumption is weak so we have three points to address one is the continuous wage hike and two increase in the number of households of double income that will be created by having women to work much more I think that's underway and third this is a kind of technical decrease of insurance premium to be charged from the individual payroll that is now reaching as much as 5% of the payroll that is very important to increase disposable income so this is technical but this is very important let me touch upon and explain the continuous wage hike this is underway but the labor share of national income has dropped while we corporations are reporting record highs and profits so and most CEOs are still hesitant to invest to pay more to wages because we feel still understandably skeptical of the sustain of growth so I support the current activity of the other administration to pressure business to increase wages but in the exchange of the decrease of the tax I mean corporate tax rate to the mid 20s gradually so that's important and another thing is definitely investment opportunity I just skipped the labor but the investment opportunity in the domestic market definitely we have to work on much more effort to the deregulate I mean bedrock regulations and we have lots of opportunity which is a potential like our healthcare industry including health longevity I mean longer longevity that's a prevent medicine and as the minister mentioned IPS and nutritional products and robotics to the elderly care and maybe clean energy so those are potential areas and we may be able to definitely perhaps we can make use of the fourth industrial revolution for that database big data analysis and AI they will be playing a key role for Japan to pick up its opportunity for investments I'd like to talk more about the council meeting I can't talk I said professor I talk too much you'll have plenty of time to actually also questions to the minister you have always been a big believer that the oil price will work but actually given what's happened on the markets in the last two weeks given that we don't really know what China's policy on yuan is given that the oil price may continue to go further how difficult really will it be for epidemics to work and for deflation to stop Francine as you say after 20 years of being a critic of Japanese policies it's been my pleasure for the last two weeks I think it's either way but I think it's very important to just put in global context the structural reforms that my colleagues just mentioned adding 850,000 people women to the workforce is enormous that's enough to offset shrinkage of the workforce for three or four years that is a huge long-term change some of those women are part time but that's the way we learned from the Nordics and arrangements this is the single biggest thing that they could do and they've done it corporate governance again it's getting lost as you mentioned Francine the markets are extremely skeptical but they're not just skeptical in Japan they're skeptical everywhere and so some of the corporate reforms that my friend mentioned as well as the minister are not getting as much credit as they do but if you think about Toshiba Olympus these other famous cases they could never have directers and external forces so to me when you talk about the uphill battle for Abagnomics which is true I think the issue is what's been a huge achievement of the Abagn government and the bank of Japan frankly is that the problems besetting Japan now are the same ones besetting the US and Europe it used to be Japan had all the same problems as everybody else plus its own internal damaging problems clearly there's still more reform to be done but what you're facing in Japan now is this disengagement of the real economy from the nominal which is what we're seeing in Europe and in the US that you get growth you get full employment you still don't get inflation and the disengagement of wages from productivity which I think throughout the Davos conference people have said is the dark side of the fourth industrial revolution and so I completely support the idea of the continual wage hike in just one more sentence Olivier Blanchard the former chief economist of the IMF with us at Peterson and I co-authored an aggressive plan encouraging the government to be much more aggressive about raising wages and trying to create a 70 style price wage cycle that leading companies do give wage hikes and they pass on the price hikes as a return and you should be going for a much higher wage hike and this is not just to get out of deflation but to make explicit what I think is implicit here that's the only way you're going to stop the problem in Japan. You have to buy time by creating some nominal growth that further exceeds real growth or else it will be too big and so the final thing I would say is is where I disagree with my friend and the government they should withhold the corporate tax bill until the wages are delivered on a commitment from the corporations. They should not bring it to the diet until these very fat profitable corporations share with the workers. Minister, a reaction to maybe that last point? We have a diagonal between the business management and the government. We are asking them to increase the wages. You might wonder if Japan is a country of free market economy or not but what's important here is that we have to get out of the deflationary mindset. Why is that internal tension increases and they're not reflected on in the time of deflation when the tight financial institutions are somehow inertial institutions but financial institutions why institutions are tight they deny the same lunch. And it is fine they try to extend the money but when it's raining they do not lend. And so the financial institutions management do not need to hold someone and the business corporations also when investment is needed and then if we could do internal retention that would be the most difficult and so it is not restricted on the wages so we have to change the mindset of business management therefore government is asking them to increase the wages and the payment to the subcontractors and increase the investment that's what we are doing and working towards the management. There are clear deflationary pressures on the world impacting Japan as one of the key architects of Abinomics do you feel under pressure to step up reforms or to do them more aggressively? Well through the dialogue between the management and the government what we are doing to encourage the investment community our end research development and the management we ask the government to reform the relation to that end when that business is made and our minister would the immediate construction to implement that when it's possible so we ask them to be active investment and the management would ask the government to regulate some of the bottleneck regulations so we are continuing with this kind of dialogue which means that through such exchange of views we will have immediate it's been three days at the World Economic Forum and there's a lot of concern for saying we're going back to 2008 kind of crisis it disagrees with that but it's very clear that it puts a lot more pressure on Abinomics is there anything that you see in the real economy are you concerned that there will be a lot less capital spending because of what we're seeing around the world that people will hold back that CEO's fear even if it's unjustified and so don't spend so much I think you're right about the reform in Japan to create as I mentioned earlier domestic demand not relying on too much export from Japan and we have the potential demand like healthcare because of the aging society which is a social need and that needs lots of private investments but we feel so scared because it's run by publicly mostly and there is a huge refill and definitely we have to promote our businesses in Japan itself but as the minister mentioned still we have in Asia in the bottom of the heart so that's a chicken and egg issue the government at least or the private sectors and lead but we have to have a target at the end of the by the end of the 2018 that means the three years from now by then it's a shame for a business dealer to say but we need definitely strong initiative from of the administration much more than before that's why I mentioned the resilient economy for Japan from bad effect from the world economy so we have to expedite our structural reform sorry go ahead is very heartening always to hear a business leader from Japan like Tadeshi talk about domestic demand in a serious way and what the last several years have proven for Japan and for Germany and for a whole bunch of places it's not just the Americans whine about trade deficits it really is for your own stability and security a good thing to have a domestic base of demand and again what I want to emphasize is and this is a very Davos thing but I think it's right the kinds of things that Tadeshi is talking about in terms of private sector investment in healthcare dealing with aging these are common challenges across the rich world and we have to think now in addition what we can do at a global level to free up long term investment infrastructure investment we had a very good session off the record yesterday including some Japanese leaders on how things at the global level are interfering with appetite for infrastructure investment for major investment but I also going back to something that minister Mari was key in I also think even if we're worried about domestic reform the trade deal the Trans-Pacific Partnership is huge it's had a huge effect symbolically and in money terms on agriculture in Japan if and when the US Congress passes it which they will it's just a question of when every Japanese family is going to get a tax cut effectively because the cost of food is going to go down and so always remember this is what I try to tell people in the US a trade deal really isn't about opening markets it's about transforming the economies that are part of the deal Adam a quick question also on monetary policy Governor Crowe came on Bloomberg TV for half an hour yesterday he spoke in a panel this morning and of course he says look he's not seeing the effect of worldwide deflationary pressures yet we're expecting the BOJ to act next week but he's suggesting look he has more firepower and he's ready to do almost whatever it takes does he have one shot this is what the markets believe right that he has one shot to get it right or again he fired multiple shots no I think the markets are in general at the moment getting it wrong and with respect to the Bank of Japan I think they're definitely getting it wrong I talk with Governor Crowe I'm a big fan I think it would be probably a mistake to do more right now because it's not going to have an immediate effect if it's a global panic and a global deflationary pressure from energy prices and a global problem doing a little more QE in Japan is not going to make that much difference it's not if the yen were to go skyrocketing that's different Mr. Murray's right the Abenauts came in with a yen that was vastly overvalued it's not now and so it's not a scam it's just you don't want to do something that you make a big deal out of the markets make a big deal out of and two months later you find there isn't been much effect I think the central banks would be wise to just ride out this panic and wait Minister how do you view the markets the topic centered a bear market as a CEO as a policy maker as a minister do you need to ignore the market and understand exactly the angst that they have and the biggest but who recently most of the major the economies have hit the ceiling and probably it is now the time the development economies to be a driving force and a building they find and the G7 summit will be held in Japan the very scenic place of the G7 up the G7 and the Prime Minister will be in the chair and there we can clearly declare that the development countries will be a driving force or the economy we should send up this clear message and I'm sure Prime Minister Abe has and investors are concerned about the sales tax increase for the second time what are your thoughts the law is in place so second increase should be but when the first round of consumption tax increase there has been a downward pressure on the consumption there has been a linear impact therefore whether to increase again the government is trying to create a situation so that if we could we should extend two or three years more to implement the 3% increase of the consumption tax because definitely consumption tax affected I mean 3% increase of the two years ago affected economy a lot we have to analyze carefully but having said that I would like to support the increase because we have to show the world that our economy is fine to be able to increase 2% but the reality is so hard so we have to pump up the economy stimulate the economy as soon as possible because the world economy is so weak and weaker than we expected so again there is no demand because of the aging population which needs more healthcare so that means private health care services should be provided so that we are almost at bay to make movements toward healthcare those areas which we have been talking about for many years but this is the last chance but a good thing for Japan because we have to make a move another factor we are in the situation of acute labor shortage this is quite rare among developed countries like Japan and the US almost everybody is hired and we have to increase the labor one women, senior citizens third, I like to address foreign workers now we have to be serious about it we have the foreign training system for as a foreign aid but we can alter the laws to be able to extend their state in Japan from the current three years to five for example that's underway as a matter of fact and after five years they can be eligible to apply to the permanent residence like US green cards so this kind of new thing to be impactful to solve the issues that kind of things are needed before increase of two percent of consumption to provide positive momentum to the market and to the people last year I had the pleasure to be on the Japan panel as well and I said that for the future of Japan it had to get over being either racist or sexist that is it had to either allow immigration foreign workers because no they don't like the word immigration to women and I thought I wouldn't be invited back and I think it's a sign of how far things have come that Takeshi is saying this and I'm invited back but joking aside as important as that is I don't fully agree with the postponement of the consumption tax hike or rather you can only postpone it if you get the inflation up because the problem is the economy it has domestic savings it has its own currency but the problem is especially with an aging society you have a certain amount of government spending you need to do you have a tax base that's slightly shrinking and if you're not careful there can be a sudden jump in the interest and debt payments and what that won't destroy the Japanese economy but it will force a very rapid either tax hike or budget cut it's like I said if you're not going to do immigration you have to do women preferably both if you're not going to do the consumption tax hike then you damn well better get nominal growth much more up because that's the only way you're going to buy time and space to avoid that kind of harsh thing on the budget Minister how will you revitalize the labor force do you think womenomics will definitely work and comment on foreign workers in Japan in fact in Japan those who are willing and anxious to work there are 6.5 million of those people who really work to work and there are additional 3 million who want to work so put together 9.5 million women leaders to increase labor force and how to make it possible for them to take part in labor market is of course the most important and the women's participation in the labor market as I said increased by nearly 1 million we've increased the child care facilities and also increased provision for the maternity care leave from one house to increase by one third and so under the banner of womenomics we are trying to encourage the active participation of women and to laboration women so there are many such but there are many some such but the the the the the the the the the the the and for the nursing, and giving milk to the babies. And they're chasing after each other, and to mothers and children, and the milking the babies. And the male would never think of that, but so welcome by women. And so the male management should be aware of growing the business and the economy by introducing women's viewpoints. Can you give us a sense of the workforce that you're looking for, how difficult it is and maybe answer some of the points that the minister was making. What are you seeing in the real economy and in your business? In the service sectors, definitely women are leading the business itself as well as the consumption because the best and largest customers are female, customers definitely, and we have to stay with those people. I mean women, I mean for the decision-making especially in the service sectors. But having said that, can business leaders promote them all of a sudden to the senior positions? I don't think so. What we can do is to increase population in the organization at first. So for example, increase of recruits, 52% to 60%, I mean 51% to 65%, should be women to increase population in one organization. That's the first step. And that's what we business are now working on. And then over 10 years, we will see good managers, especially service sectors like healthcare, retail businesses, we will see good managers because they know customers more than us. And child care, we need good managers. And over years, we will see good managers. So that means, you know, necessity from the business promotes naturally female workers to be management. But over more than five, maybe six years, population in the organization is a key thing for us to promote. So you think we will be able to see whether womenomics works in five years from now? Yes, that's right. It's in underway definitely by strong leadership of both business and the government. But all of a sudden, can we put the senior physician? Well, they should have more experience. And they should have, you know, why are you promoted? Is that because of women? It's not really good. Should have experience, should have knowledge, should have capability. So we have to increase the population in the organization, just like a company. Let me give a bit of a global perspective on this issue. The Peterson Institute, we're about to issue a study. It'll come out first week of February. We've done a snapshot of the entire corporate world around the world in 2014. We have 21,000 companies in our data set, 91 countries. And it speaks to this issue. And I'll just be very brief. First thing is, Japan, Korea, East Asia in general does far underperform in terms of representation to women. I know the minister, I know Takeshi, you're not denying that. But it just, it stands out that if you control for income, what industries they're in, all these things, Japan and Korea are way behind. Second, and this partially supports what Takeshi was saying, we find that there is huge variation across countries, across businesses in profitability associated with how many women you have in management. So if you have a lot of women in management in general, in C-suites, you do get higher profitability, controlling for a whole host of factors. However, it's not connected with boards. So this sort of supports, I don't want to fully endorse what Takeshi was saying, but it probably supports Takeshi's point. Our interpretation of the data is that forcing women onto boards or encouraging women on the board certainly does no harm. We don't see any evidence that it's bad for profitability. But it doesn't have the effect. What you want to see is a pipeline and the kinds of things the minister was talking about, an environment that's a good working world for women. So you have lots of women there and they make their way through and they're part of the leadership. And that has a clear effect on profitability. And so without getting into issues of, it's a deferment of action, do they need experience, there is strong evidence that it's got to be about not just putting women at the top, it's got to be about getting women supported to be senior workers. And in Japan in particular, but throughout the Western world, by Western I mean Japan market oriented rich world, it's about paternity leave as well as maternity leave. It's about flexible for women in child bearing age. It's about getting women back into management if they come out for a bit. These are the policies that matter. Corporations are having advancing the policies to give the maternity leave and such as the childcare benefits by giving some subsidies. I think I want to mention that we'd like to have more increase in the number of childcare facilities, but it's run mostly publicly. We need to bring in private experience and the knowledge and the managers. And most managers can be female. So we have to develop a new system in society to support women to work. That is still behind. Though the economic supports a lot, we need more. So if we have more women to work, then more facilities needed. So it's chicken and egg. So I think it's advancing, but we need more childcare. But that should be run by private initiative, I mean public initiative, I mean private initiative. Minister, we're at the beginning of 2016. The IMF has said again that more reforms need to be put in place for economics to work. What is the one or maybe two key reforms that you will work on in the next 12 months to either implement more quickly or to accelerate the kind of engine of these reforms? Every year, we carry out the monitoring and the progress control of the reform. In other words, we set out a plan of progress which we have to achieve in coming one year, having the yardstick and the measure that and control that. And towards the Tokyo Olympics in 2020, we would like to do the specific shows and for instance, at the time of 2020, there will be self-driven vehicles managing the movement of the people. And also within three years, there will be parcel delivery realized by drones. So drones will deliver the parcels. We can start that in three years. And also, Hydrogen Society, we will realize the Hydrogen Society in Japan ahead of others by 2020. So these are specific examples we presented and having that as a target and goal. What is in 30 seconds, the one reform that you need to be seeing in the next 12 months? Living mobility. A lot of talent tends to stay in big corporations. And we need talent to the ventures and the small enterprises. But there is a huge pay gap. So that should become, I mean, subsidized by for the time being, let's say from the government, let's say three years from the special account, which has already 60 billion dollars without no destination. Definitely we have to mobilize the talent to revitalize the economy. So I would not say we can easily fire people. I do not support, but we have to change the laws to create the mobility of labor. So that's the challenge for the government. But it's a prerequisite to revitalize the economy. Adam, in terms of timeline, in two years will we know if this policy has worked? Well, we will know already that the policy has worked, as the minister said, as Takeshi said, and as Governor Kuroda said, the real economy in Japan is actually cycling up right. What we won't know for another two years is whether this is sufficient to make Japan resilient to external shocks, to make Japan back in control of its fiscal destiny, to make Japan a solid ongoing partner in Asia, which was always Prime Minister Abe's motivation. I am hopeful it will. But you said one line, one line is you need multi-year wage increases in indexing if necessary. Minister, you've also had some negative press, some negative comments on the press. When will you respond to what's been said? I'm talking about my personal case and my negative press. There has been a weekly magazine before involving myself in my secretary, and that caused some emotions. I wanted to come to the board with a brighter set of mind, and I'm surrounded by a camera in a different notion. And we are conducting a survey going on, so in the course of next week, I should be in a position to give a press coverage. At the moment, you don't expect it to impact your willingness to do reform or have an omics in any way? The Abe Cabinet. And one of the important ministers of the Abe Cabinet, I'm sorry that I'm causing a big trouble for Prime Ministers, but I feel this is not the place to talk about my personal title. But rather, about my return, I will take based on the solid survey and I will make myself and make my position. Minister and gentlemen, thank you so much for a great panel.