2015 President and 2016 Chairman of the American Chamber of Commerce in Japan Jay Ponazecki looks at the progress made in Japan’s business environment and the efforts being made to strengthen its link with foreign entities, particularly in the US.
How do you currently view both trade and commercial relations between Japan and the US?
We view them as being very positive. You may have heard the news of Japan briefly slipping into a “technical recession” last year, but many of our members take more of a long-term approach to the economy – having worked in other economies and weathering ups and downs in the past, a “technical recession” may seem less relevant.
Having said that, taking a long-term view of Prime Minster Abe’s policy initiatives as they relate to the three arrows or Abenomics, you start to see real progress being made since he took office. There are other factors such as his party, the Liberal Democratic Party (LDP), holding the majority in both houses of the Diet, and the exciting news of Japan hosting the World Rugby Cup Championships in 2019 and the Olympic and Paralympic Games in 2020 that contribute to more people and countries showing interest in Japan over the long term.
We expect Prime Minster Abe to continue with his reform and growth agenda. The conclusion of the Trans-Pacific Partnership (TPP) negotiations, a key component of his growth strategy, adds further momentum toward achieving his goal. The ACCJ stands ready to support further reform and growth in Japan, and it is encouraging to hear the Prime Minister say on numerous occasions that he wants to make Japan the easiest place to do business in the world.
Putting all this together, we feel confident about seizing future opportunities that lie ahead.
What are the current key areas of focus for you, as a Chamber?
The ACCJ is fully committed to a high standard 21st century free trade agreement. The TPP plays a pivotal role in complementing Prime Minster Abe’s Growth Strategy, and helps create a new framework that covers key aspects of trade and investment in one of the most vibrant regions of the world, representing approximately 40% of global GDP.
With the next steps being ratification and implementation, we will be investing more time in refining our message in support of that by both Japan and the United States. The ACCJ has over 60 committees representing various industries, many of which may have particular views on the pros and cons of the final agreement, but we have built a consensus as an organization in support of TPP.
We are pleased with some of the progress being made under the Abe Administration, particularly in the areas of corporate tax, agriculture, women’s empowerment and corporate governance reform. However, further labor, regulatory and structural reforms are desired, and should be encouraged under Abenomics. The ACCJ will continue to help support and facilitate further reform by offering pragmatic, solutions-based recommendations and sharing global best practices.
Especially in terms of labor reform, the ACCJ has been advocating for a new form of labor contract that could help spur further growth. Approximately 40% of the current labor market in Japan consists of part-time workers or non-regular employees, who tend to have far less job security, earnings and benefits than full-time workers or regular employees. However, a new form of labor contract would give companies more options to hire and manage their talent pool. We have been advocating for the creation of a new form of labor contract for an indefinite term, with an agreement for a legally enforceable amount of severance pay in the event of termination that is based on the employee’s total years of service at the company – a model that has been adopted in many other countries.
The ACCJ also undertakes two major annual advocacy initiatives called the “Diet Doorknock” and the “Washington D.C. Doorknock” which focus on Japanese and US government outreach. A delegation of ACCJ leaders, led by the ACCJ President, meets with senior government officials and business leaders to exchange ideas and information on issues and policies critical to both countries – for example, the TPP has been at the center of our past doorknock visits to Washington DC and the Diet.
In addition to employment reform, are there any other areas you would like to see changes?
The ACCJ currently has about 15 active viewpoints focused primarily on policy recommendations aimed at specific laws and regulations that we believe would help change the business environment in Japan in a positive way. Years ago, we were trying to overcome trade barriers. It was like a time when you were outside the castle, staring at the moat, wondering how you were going to get in—pondering how to overcome the impossibility of that task. Now we feel that we’re not only in the castle; we’re very much at the table. We’re invited to participate in key study groups, and to give testimony at government hearings, and we’re at a level of discussion where we’re sharing global best practices and making what we believe are very solutions-based, pragmatic recommendations that will be good for not only foreign businesses in Japan, but Japanese businesses as well. There’s always going to be, during the course of any year, difficulties predicting the issues that are going to come up, but we can share with you the ones where we have positions now.
By way of example, we recently issued a viewpoint encouraging outside asset managers who are appointed by Japan’s Government Pension and Investment Fund to strictly follow the new Corporate Governance Code even more closely. This, we believe, would benefit long-term capital gains, which, in essence, will lessen the impact on the amount of benefits future pensioners can receive.
The ACCJ also compiles “white papers,” which are a collection of our active viewpoints and positions on particular issues and industries. These tend to be our bigger initiatives and this year we have updated our healthcare white paper. The healthcare white paper, officially known as the 2015 ACCJ-EBC Health Policy White Paper titled, “Lengthening Healthy Life spans to Boost Economic Growth,” was jointly developed and issued by the ACCJ and the European Business Council (EBC). It focuses primarily on early prevention and treatment, offering over 190 policy recommendations across more than 40 topic sections.
Other white papers in the pipeline are our supplemental white paper on women’s healthcare, and an updated white paper on financial services. Womenomics issues are especially important, considering that one of Prime Minister Abe’s signature policy initiatives is women’s empowerment and advancement in business and society—helping more women enter the workforce and reach management positions. The ACCJ has also hosted a Women In Business (WIB) Summit on an annual basis, featuring Prime Minister Abe, US Ambassador Caroline Kennedy and other prominent speakers and dignitaries. Furthermore, our WIB Committee is finalizing a white paper, covering these vital issues and offering practical solutions-based recommendations in line with global best practices.
The ACCJ Internet Economy Task Force has been active on the advocacy front, especially in terms of issues and policy recommendations aimed at cross-border data flows, cyber security and privacy. Our High Performance Computing Task Force has issued a viewpoint on the government procurement process of high performing supercomputers.
We have also just expanded our biosciences subcommittee to cover regenerative medicine, given the innovation and the advancements in that field, and we have launched an Education Task Force focusing on potential education reforms necessary to ensure that there’s a sizable pool of global talent down the line and investing in and otherwise supporting the future of the next generation of US-Japan leaders.
ACCJ white papers and viewpoints are available on the ACCJ website.
How many members does the ACCJ have?
We have more than 3,000 individual members, which is more than our pre-global financial crisis membership numbers and shows the strength of interest in Japan. It’s not a scientific measurement, but certainly it shows the level of interest in doing business in Japan. Our members represent over 1,000 companies.
How does the ACCJ promote a better understanding of the climate to new people coming into Japan?
I think new people coming in want to meet with their counterparts and peers in their industry sector, to share experiences, and to manage expectations of corporate headquarters. For many of our members, Japan is still one of the most important markets for their products—and there’s still a sense, just given the very competitive aspect of the Japanese market and the high expectations of the consumer, that, if you’re developing a new product or service, and you get it off to a good start in Japan, you’ll do well with that product or service outside of Japan.
What capacity does Japan have to fully globalize?
I think for many smaller Japanese companies and even some of the larger ones, some of their focus is on the domestic market. There was a bit of a wakeup call at the time of the 2011 tsunami and earthquake in terms of focusing on supply chain issues. That was compounded by the flooding in Thailand, where a number of offshore manufacturing facilities were unfortunately in a flood zone. That started getting more and more Japanese and non-Japanese companies thinking more about supply chain issues. There is also, when you talk to foreign as well as Japanese companies, a shared experience or concern with access to global talent in Japan, and so that is an area, like through education reform, where more work has to be done. However, you also have to think of the Olympics and the Paralympics in 2020, when you’re going to have even more non-Japanese speakers coming to Japan. This is a prime opportunity to gear up the next generation to be not only global participants in the 2020 Games, but also global citizens of the business world, the US-Japan relationship and other cross border relationships.
What is your final message to readers?
Visit Japan. Invest in Japan. Join the ACCJ.
That’s the t-shirt message. The longer message is really the hope that we can help people understand that Japan has changed and is still changing. We do a D.C. Doorknock every year and convey some of our key advocacy concerns and objectives when we visit Washington.
Sometimes, Abenomics can be difficult to measure, because it’s referred to as the third arrow, but, in many respects, it’s really 1,000 darts and they’re all traveling at different trajectories and speeds toward their target. When you think about when Prime Minister Abe first announced Abenomics and now, the changes that have occurred—like the ones related to corporate governance, agricultural reform, corporate tax, and Womenomics—are really quite significant and we should be encouraged by that and perhaps be a little more patient in measuring success.
With all eyes on Japan at least until 2020, if not beyond, the Japanese government, Prime Minister Abe and Japanese businesses and individuals are going to be very focused on wanting to present the best possible Japan that they can present to the world.
There’s an amazing wealth of talent in Japan—entrepreneurial, innovative, engineering talent that has tremendous potential for the future. Japan is still the third largest economy and we have no reason to believe that it’s going to fall from that position.
I think while we’re all focused on the here and now, we all have to, as individuals, make sure that we’re investing in and supporting the next generation of leaders in the US-Japan relationship. That’s very important.
One last story in case some people still doubt whether Japan is capable of material change.
At the time of the 2011 triple disaster, there was a lot of talk and a lot of belief that we would have rolling blackouts because of the interruption in the energy supply. Our members and many other businesses were focused on implementing plans to deal with rolling blackouts. The Japanese government imposed mandatory energy reductions and businesses were told to reduce their energy consumption. Almost overnight the people reduced their household consumption. As a result, there were very limited rolling blackouts. There was really almost an overnight decision of “we need to do this for Japan,” “we need to do this for ourselves,” and energy consumption went down not only at the business level, but also at the individual household level to such an extent that there were very limited rolling blackouts. I think that’s an amazing story about not only the resilience of the people and their innovation and forward thinking in response to an issue that needed to be addressed, and also their ability to come together overnight and take action.
This story really illustrates much of the Japan experience.