Mr Yotaro Kobayashi
Chairman, Fuji Xerox Co Limited
Asia Society AustralAsia Centre
Sofitel Wentworth Sydney
February 15, 2005
"Revitalised and Resurgent: Japan's New Business Climate"
Mr Morgan, thank you very much for your very generous introduction. Excellencies, ladies and gentlemen, it is my great honour and pleasure to be able to be here as a guest speaker at the Asia Society AustralAsia Centre.
My mission tonight, as I understand it, is to talk to you about how the Japanese economy is faring today, and what it will look like, and if time allows, maybe a few comments about the political situation, and if even more time is available, maybe talk about the external relationship with major trading partners, particularly China.
I'm not at all certain whether I can manage all that, so at the very beginning, at the risk of perhaps being too brief, I will just outline a couple of conclusions and as you probably noticed when our Prime Minister spoke; maybe he was different when he spoke here, but usually when he speaks in Japan, he loves to speak in simple short sentences. I'm not trying to emulate Mr Koizumi, but just a few conclusions first.
The Japanese economy is at the moment in a plateau, but I think it is going to be temporary; fundamentally because the upswing of the Japanese economy that we have been experiencing since 2002 is fundamentally based on a number of structural changes that have taken place, both in the manufacturing and service sectors. But one big question mark is that, as you all know, the economy has been helped a great deal by the very strong economies in China and the United States. So of course we all share some questions about the US economy, their twin deficits, where the dollar will go relative to the yen or euro. But, if these economies stay relatively healthy, the Japanese economy will come out of the plateau fairly quickly, and from the latter half of 2005, my sense is that economic growth will be somewhere in the range of 2-3%.
Secondly, the structural changes. We all know and you all know what was described as “the Lost Decade,” which came to Japan immediately after the burst of the bubble. We lost many things, but at the same time we learned a great deal, among which probably a lot of Japanese businesses learned how to get back to the fundamentals. The manufacturing sector has come down to a much lower break-even point. But during the course of restructuring, this is probably very important in the long run, Japanese society, including the trade unions, learned that we will never go back, at least in the foreseeable future, to the days of enjoying 2% or even lower unemployment rate. 4% is probably reasonable; we may experience probably the higher end of 4% or lower end of 5%, and that by itself will not be fatal. This is a very important lesson that the Japanese society learned during this whole process.