Regional Agenda World Economic Forum Japan Meeting Leveraging Collective Intelligence for Unprecedented Challenges Roppongi, Tokyo, Japan 2-3 June 2014

August 2014 Contents

3 Preface

4 Executive Summary

6 Japan’s Vision

6 Facing the challenges and concerns

8 Can Abenomics deliver?

10 Japan’s National Transformation

10 Abenomics’ third “arrow”: societal and economic structural reforms

13 Leveraging the Tokyo 2020 Olympic Games

15 Enhancing diversity – closing Japan’s gender gap

18 Japan’s Contribution to Global and Regional Agendas

18 Innovation and sustainability

21 North-East Asia’s geopolitics and geoeconomics

23 Contributing to regional risk resilience

24 Designing a new social system and infrastructure

28 Acknowledgements

28 Further Information

29 Contributors Preface

The World Economic Forum Japan Meeting is the annual meeting of the Forum’s Japanese community. The focus of the 2014 meeting was the programme of Preface Prime Minister Shinzo Abe’s government to revitalize the Japanese economy and society, and Japan’s engagement in the world. Known as Abenomics, this “three- arrow”, or three-pronged strategy, aims to transform Japan and help it out of its more than two decades of stagnancy, debt and doubt.

Held more than 18 months after Prime Minister Abe took office, the Japan Meeting offered 200 business, government and civil society leaders from Japan and other countries, including several participants via videoconference, the opportunity to assess the progress of Abenomics, particularly the third “arrow” or component – the growth strategy, the most complex and challenging part of the programme. Sessions included interactive discussions of the reform agenda ahead, the potential impact of the Tokyo 2020 Olympic Games, gender inequality, Japan’s capacity to be a leader in contributing to energy efficiency and sustainability in the world, the geopolitical challenges in the region and the opportunities for Japan to share its expertise and social innovations.

Prime Minister Abe addressed participants, reviewing the achievements of Abenomics since addressing world leaders at the World Economic Forum Annual Meeting 2014 in Davos-Klosters, Switzerland, in January. In a succinct speech delivered with resolve, the prime minister provided a preview of the reform package that his government would unveil just days later, declaring that “Japan is clearly becoming reborn and will continue to change going forward.”

The meeting in Tokyo allowed all stakeholders in Japan’s future to exchange views and to chart the way forward for the country’s economic resurgence. “It is very crucial for the world that the Japanese transformation succeeds,” Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, said at the breakfast opening the event.

Many young people participated, including Members of the Forum of Young Global Leaders and the Global Shapers Community. They ensured that the deliberations were forward looking, inclusive and focused on finding solutions. To reinvigorate its economy, Japan will need to mobilize its young people to drive many of the necessary social and political changes.

The meeting’s discussions will help shape sessions on many related issues at the Forum’s upcoming global meetings – the Annual Meeting of the New Champions in Tianjin, China on 10-12 September 2014; the Summit on the Global Agenda in Dubai, United Arab Emirates on 9-11 November 2014; and the World Economic Forum Annual Meeting 2015 in Davos-Klosters on 21-24 January 2015.

The World Economic Forum’s Japanese community will redouble its Akira Tsuchiya engagement in Forum activities to contribute not only to the success of Japan’s Executive Director transformation, but also to addressing the global challenges in which Japan can World Economic Forum Japan be an important actor.

Leveraging Collective Intelligence for Unprecedented Challenges 3 Executive Summary

The World Economic Forum Japan Seven key action points emerged from up support for the programme and Meeting, held in Tokyo on 2-3 June the meeting: drive further, deeper restructuring. 2014, offered the Forum’s Japanese This will help with trickier areas community the opportunity to review –– Focus on growth strategy: While in need of change, such as the progress of the reform programme, the “three-arrow” Abenomics immigration. known as Abenomics, of Prime programme has yielded significant Minister Shinzo Abe’s government, results, owing particularly to the –– Use the Olympics to drive and to chart the future for Japan’s first two “arrows” or components reforms: Japan must harness the transformation. The country faces (the implementation of monetary inspirational and motivational power unprecedented challenges as it tries easing and a flexible fiscal policy), of the Tokyo 2020 Olympics to drive to not only stimulate its economy out the government must focus on the social and economic reforms of its deflationary spiral, but also to implementing the third component, needed to generate new growth. transform its society so it can recapture its growth strategy. The goal of using the Olympics to its confidence and strengthen its showcase Japanese technology, engagement in the world. Tackling –– Move faster on priority issues: talent and culture can be a powerful these challenges – from bridging a The government has put in place engine for innovation, action and persistent gender gap to reforming key measures of its growth unifying the country. longstanding labour practices – must strategy, which includes increasing be an inclusive project involving the the consumption tax, liberalizing –– Address the challenge of gender collective efforts of all sectors of the power sector and joining the inequality: Government measures Japanese society. Trans-Pacific Partnership (TPP) and policies, including tax reforms, negotiations, but it must move will not be enough to bridge the The discussions in Tokyo brought faster and more comprehensively gender gap. A comprehensive together ministers and senior on agriculture, the labour market, change of mindset is required at government officials with business and immigration and solutions to the all levels in the workplace, both civil society leaders in frank exchanges gender gap. in urban and rural areas. Gender on topics including the progress of inequality must be regarded not Abenomics, the opportunities provided –– Communicate results: The only as an issue for women, but by the Tokyo 2020 Olympic Games, government should achieve early, also as a challenge that men must gender inequality, sustainability, the concrete results from its growth confront and help to resolve if geopolitical challenges in North- strategy reforms, and communicate Japan is to succeed in transforming East Asia, social innovation and risk successes to the public, to shore its economy. resilience.

01: Japan’s National 01 Transformation: Abenomics’ Third Arrow: Societal and Economic Structural Reforms session

4 World Economic Forum Japan Meeting Executive Summary

01: Georges Desvaux, 01 Managing Partner, Japan –– Develop multitrack diplomacy: Office, McKinsey & To lower the tensions in relations Company between Japan and China, both 02: Masaru Kato, Vice-Chairman, Sony sides should develop person-to- Corporation person connections, including 03: GAC Session: Disaster Risk Resilience deepening business ties and and Japan’s Global investment, and cultural and Contribution session educational people-to-people exchanges.

–– Share expertise: Japan possesses experience and special knowledge in key areas such as energy- saving technology, infrastructure development and financing, dealing with ageing demographics, caring for the elderly and disaster 02 preparedness. Japan can build goodwill with its neighbours and cultivate new markets and fresh growth by focusing on ways to share what it does best with its economic and trading partners.

“I hope that you can now understand that Japan is clearly becoming reborn, and that it will continue to change going forward.”

03

Shinzo Abe, Prime Minister of Japan

Leveraging Collective Intelligence for Unprecedented Challenges 5 Japan’s Vision 01

Facing the challenges and concerns are for rising inflation, with the economy now half way to the 2% “Japan can no longer be inward The intense international interest in goal. Domestic demand is now fuelling looking. It is imperative for us to the Japanese government’s reform recovery. pursue even further growth by programme underscores how both interacting and engaging in important it is to the world that Japan’s But in the more than 18 months friendly competition around the transformative process succeeds. since Abe returned to office, doubts globe.” Since the global recession more than have mounted over his ability to get five years ago, the global economy the third “arrow” or component – a has lacked solid growth drivers. The growth strategy involving difficult recovery has been weak and slow. structural reforms – even close to the While emerging markets rebounded target. Abe has been bold with his quickly, their performance has since promises, insisting that the widely lagged. Europe has been hobbled by held assumption that major reforms its debt crisis and existential questions in Japan are impossible no longer about the integrity and viability of the applies. At the World Economic Forum Eurozone. Meanwhile, the recovery in Annual Meeting 2014 in January, he the United States has gradually taken declared that he would advance his hold, though the severe winter has led reform agenda by breaking through the to a setback. “fixed thinking” that has kept Japan from breaking out of more than two Great hopes are pinned on Japan decades of stasis, marked by deflation Akira Amari, Minister for and Abenomics, Prime Minister and debt. Economic Revitalization and Shinzo Abe’s “three-arrow” or three- Minister for Economic and pronged plan to revitalize the economy Yet, members of his government Fiscal Policy of Japan and make it more competitive and have been cautious, warning that the better able to contribute to global growth strategy is not something that growth. Monetary easing and the can be implemented and yield results implementation of a flexible fiscal in the short term. Plans have to be policy – spending where necessary for made, and laws amended and put into growth, consumption tax increases, effect. The third component should lower corporate taxes and reducing aim at many targets – social security, public debt over the long term – are healthcare, agriculture, infrastructure well under way. Notably, expectations development, the expansion of trade, immigration and the labour market. Some will be easy hits, while others will be more difficult.

6 World Economic Forum Japan Meeting Japan’s Vision

01: Japan’s Contribution 01 to Global and Regional Agendas: Designing New Social System and Infrastructure session 02: Japan’s Contribution to Global and Regional Agendas: North-East Asia’s Geopolitics and Geoeconomics session 03: Sadako Ogata, Chairperson, World Economic Forum Japan

Indeed, the government has moved supported by the yen’s falling value. women to work and remain employed? on several fronts, including measures Many corporations have held back And will it revamp its educational to liberalize the power and healthcare from investing because of uncertainties system to promote innovation, sectors and an increase in the on tax policy and regulatory reform. creativity and a global consciousness consumption tax. It has set in motion Japanese companies tend to have a and, more specifically, a facility in efforts to increase the participation low return on equity and need to be foreign languages, especially English, of women and the elderly in the encouraged to invest more to stimulate among its people? workplace. In addition, Japan has growth. joined negotiations for the ambitious External uncertainties are also creating Trans-Pacific Partnership (TPP) trade While the TPP talks have continued worries. Japan’s relations with China framework involving 12 nations, and are regarded as critical to driving and Korea have been tense, with including the United States. new growth in the Japanese economy, territorial disputes and their past history chances for concluding an agreement causing lingering bitterness. Prime But business and civil society soon appear to be fading, especially Minister Abe’s visit to the Yasukuni leaders have concerns. One is a considering the US political cycle. Shrine in December 2013 and his growing labour shortage, driven by Persistent questions exist about sending of a ritual offering in April 2014 Japan’s shrinking workforce due to Japan’s willingness to liberalize have stirred further controversy. The ageing demographics and restrictive immigration and open its labour challenging global economic climate – immigration controls, and a rebound in market. Can the country radically with sub-trend growth, the slowdown manufacturing owing to export growth change its society to make it easier for in China and continuing weakness

02 03

Leveraging Collective Intelligence for Unprecedented Challenges 7 Japan’s Vision

01 02

in Europe – is making it trickier for the third component to hit its target. Japan to implement its three-pronged Yet, Abe argued, restructuring to “It is now even more important strategy. stimulate growth is happening. “My to address the long-term reforms have already transitioned into a challenges – that is, to raise the Despite the clouds of concern, Japan new stage,” he stated. growth potential and raise the clearly has a vision for moving forward. labour participation of women Looking ahead, the Tokyo 2020 According to Abe, moves to liberalize and the elderly.” Olympics could have a significant the electricity market mean that in impact in focusing the Japanese on two years, anyone will be able to the goal of revival. TPP could also be a generate and sell electricity, and this game changer. Klaus Schwab, Founder will spur innovation in the industry. The and Executive Chairman of the World medical services sector will change as Economic Forum, told participants at well, giving people prompt access to the Japan Meeting that “there is a clear advanced treatments even within the vision here and a clear willingness to public health insurance system. “We implement that vision”. That will surely will create a structure that will channel count for a lot. patients’ unbridled hopes,” Abe told participants. Can Abenomics deliver? Agriculture will become a growth When he took the stage at the Japan driver. “We will boldly review the Meeting, the prime minister reminded various systems that have long been Haruhiko Kuroda, Governor, participants that, at the World in place in the post-war period,” he Bank of Japan Economic Forum Annual Meeting promised. This will include fundamental 2014 in January, he had made the reforms of public management and pledge that “through Abenomics, we organization of the agriculture industry. will create a vibrant Japan”. In Tokyo 01: Kiyoshi Kurokawa, 130 days later, Abe asserted: “Japan 03 Academic Fellow, National is clearly becoming reborn and will Graduate Institute for Policy Studies (GRIPS) continue to change going forward.” 02: James Nakagawa, Chief Executive Officer and Chief Care Architect, In his brief but robustly delivered Mobile Healthcare Inc. remarks, Abe outlined how his vision (MHC) of a more vibrant Japan is becoming 03: Yorihiko Kojima, Chairman of the Board, a reality. As the underpinning of that Mitsubishi Corporation vision, his three-part Abenomics programme – monetary easing, flexible fiscal policy and a growth strategy – had received widespread support at home and abroad; however, doubts have grown about his ability to push through the tough reforms needed for

8 World Economic Forum Japan Meeting Japan’s Vision

“In Davos, I stated that no vested The government, Abe added, is also Abe vowed that the new reform interests will remain immune from my reforming the tax system, including package that was to be released just drill,” the prime minister explained. “I the corporation tax. In April, the days after the Japan Meeting would will continue to increase the speed at consumption levy increased by three further bolster the reform drive. Among which this ‘drill bit’ of reform spins as I percentage points, the first rise in 17 the proposals eventually announced: shift gears rapidly.” years. “We will weather the adverse cutting the corporate income tax rate economic impacts of the tax increase of 35% to between 20% and 30%; Taking on the labour market – another without that much concern,” the prime localized pay bargaining to allow bastion of stasis – Abe said his minister remarked. The $1.2 trillion for direct negotiations over pay and government will review regulations and Government Pension Investment Fund conditions between employers and update them. This will mean making it (GPIF) has also been a target, with workers; expansion of immigration to more attractive for skilled workers to its management strategy completely address the shrinking workforce; and work in the country. “We must make revised. elimination of a spousal tax exemption Japan a place where non-Japanese, considered to be discriminatory against brimming with ability, will find it easier Japan has taken steps to widen and two-income families. Concluded Abe: to be more dynamically engaged,” he deepen engagement with its trading “We are going to achieve concurrently said. Abe noted that the employment partners, Abe observed. It reached the three goals of revitalizing the picture in Japan had improved, with a broad agreement on an economic economy, rebuilding government the ratio of job offers to job seekers partnership with Australia. Japan finances and reforming social security. rising for 17 consecutive months to and Europe are aiming to conclude a Japan will continue steadily down this a level not seen in over seven years. free-trade agreement by 2015. Last path.” Monthly wages have grown more than year, Japan joined the negotiations 2% on average, the largest increase for the TPP, the proposed free-trade in the past decade. Summer bonuses arrangement involving 12 countries. have increased more than at any time Declared Abe: “Competition now in the last 30 years. takes place on the global stage. Japan can no longer be inward looking. It is imperative for us to have the mettle to pursue even further growth by both interacting and engaging in friendly competition around the globe.”

01: Japan’s National 01 Transformation: Enhancing Diversity – Closing Japan’s Gender Gap session

Leveraging Collective Intelligence for Unprecedented Challenges 9 “The government is doing so many things. Now maybe it is Japan’s National time for the business sector to Transformation take ambitious action.”

Heizo Takenaka, Director, Global Security Research Abenomics’ third “arrow”: societal Days after the Japan Meeting, the Institute, Keio University, and economic structural reforms Abe government announced a fresh Japan; Global Agenda package of proposals to promote Council on Japan 2012-2014 Eighteen months into Prime Minister growth, including: cutting the Shinzo Abe’s administration, the big corporate income tax rate from 35% question is whether his Abenomics to between 20% and 30%; localized programme is yielding results. The pay bargaining to allow for direct focus is on the third component – negotiations between employers and the implementation through various employees over compensation and reforms of a wide-ranging growth conditions; expanding immigration strategy. At the 2014 World Economic to address the shortage of labour; Forum Japan Meeting, participants and eliminating a tax exemption that agreed that, while some progress had is regarded as biased against two- been made – notably in liberalizing the income families. power sector, raising the consumption 01: Yasuchika Hasegawa, President and Chief Executive tax and taking Japan into the TPP Officer, Takeda Pharmaceutical Company Limited, ; Hiroko Kuniya, Anchor, Today’s Close-Up, NHK (Japan trade negotiations – more work needs Broadcasting Corporation), Japan to be done. 02: Shinzo Abe, Prime Minister of Japan; Klaus Schwab, Founder and Executive Chairman of the World Economic Forum,

01 02

10 World Economic Forum Japan Meeting Japan’s National Transformation

01 02

At the Japan Meeting, business and are closing at night because of a lack 01: Japan’s National Transformation: Leveraging the Tokyo Olympics session civil society leaders conferred with of workers, despite having raised 02: Ricart Costa, Professor of Strategic Management, government ministers to discuss the hourly wages by 30%. While some IESE Business School reform agenda, what is being done and participants argued that the tight labour what needs to be done. Among the market is good news – an indication priorities was revitalization of agriculture that wages and compensation are – for the government to deregulate rising – many stressed the need for “The Trans-Pacific Partnership the sector to promote the production a sustainable immigration policy; not should be an opportunity for of quality food that is fairly priced and to open the gates to a flood of cheap Japan to undertake reforms to appealing to consumers. Rice is a labour, but to proceed in a deliberate enable it to take leadership on particular target, with the government way to bring in either people with the the global scale.” moving to introduce market-oriented skills Japan lacks or those able to policies on production and to dismantle do the jobs that cannot be filled by the price controls that have been in domestic workers. place for decades. Japan must also move to restructure Another important priority on the its labour market to allow for more government’s agenda is addressing flexibility. Measures are required to help the challenge of Japan’s ageing workers shift from mature industries demographics, already evident in its to growing ones without experiencing shrinking workforce. The goal is to turn unemployment. In addition, reforms the problem into a growth dividend by are needed to make hiring and firing investing in areas such as infrastructure practices, as well as regulations and that caters to older people, and wage structures, less rigid. research and development to create new pharmaceutical products. Japan In April 2013, the government can export its ideas, as well as its announced that special economic Douglas L. Peterson, approaches to elderly care and to zones (SEZs), or tokku, would be President and Chief Executive adjusting to an older and declining set up. In these SEZs, employment Officer, McGraw Hill Financial, population. rules would be less strict, with at-will USA employment possible. The government Business leaders put forward a range is also moving to improve labour of concerns. One pressing issue is safety standards and allow for more the shortage of labour, particularly in bargaining between employees and the agriculture, manufacturing and employers. service industries. Some restaurants

Leveraging Collective Intelligence for Unprecedented Challenges 11 Japan’s National Transformation

Freeing up the labour market will for Japan to drive structural reforms also stimulate entrepreneurship. needed in key sectors, such as “Many industries like And, through steps to integrate more agriculture and the automotive industry, automobiles have started to women and elderly in the workplace, to generate more trade, investment suffer labour shortages. This constraints on growth due to the labour and fresh growth. is an urgent matter. Wage shortage can be addressed and thus increases may not solve the help to drive new economic growth. Despite the resolve that the Abe problem.” government has expressed to keep Some business leaders have also pushing the reform “drill bit” forward called for improvements in the way in the face of vested interests and infrastructure projects are allocated, bureaucratic reluctance, doubts and for the government to move remain as to whether meaningful more quickly to enable R&D and to deregulation and restructuring can boost tourism by measures such as be achieved. Participants applauded increasing international airport landing the elegance and clarity of the slots. Abenomics framework, but proposed that the government make an effort The overarching aim is to encourage to communicate even the small more investment for growth and successes of the third component to make Japan’s economy and to the public. Tangible progress in its enterprises more competitive. implementing the growth strategy Japanese companies have been should be achieved quickly and Takeshi Niinami, President marked by low profitability and low highlighted, to build confidence in the and Chief Executive Officer, return on equity. Moves to upgrade government’s reforms and shore up Lawson; Global Agenda corporate governance, such as the support for its vision. Council on the Role of inclusion of independent directors from Business 2012-2014 outside the country, are necessary to improve company performance.

Another important goal is to expand trade. To this end, the government announced last year that it would join negotiations for the TPP. This free- trade initiative could be an opportunity

12 World Economic Forum Japan Meeting Japan’s National Transformation

01 02 03

Leveraging the Tokyo 2020 Olympic Also in prospect is a concerted effort Games to highlight Japanese culture and “We expect the Tokyo Olympics products, especially its agriculture, to be a great opportunity to Japan is looking to the Tokyo 2020 food and traditional cuisine and dietary revitalize the Japanese economy. Olympics as an opportunity to practices, known as washoku. The We want to promote mutual drive economic growth, deepen push to promote food and agriculture understanding and contribute to the country’s integration with global is in line with the government’s ongoing global security as well.” society and showcase Japanese efforts to reform the farming sector technology and culture to the world. and revamp pricing and distribution By building environmentally responsible policies. Japan will promote itself as a infrastructure and sports facilities, and part of Asia and share with other Asian integrating leading-edge technology countries the opportunities that the in every aspect of the Olympic Games Olympics will bring. (from transport systems to signage), the government aims to enhance Business and civil society leaders Japan’s role in the global economy praised Japan’s vision for the Tokyo and contribute to better understanding 2020 Olympics, especially its aim to among nations, especially through make the global sports festival not sports and cultural activities. Among just about Japan but about Asia. The the plans: a Davos-style meeting on Olympics’ legacy will be important; sports after the 2016 Olympics in Rio by focusing on making these the de Janeiro, Brazil. most technologically advanced and Hakubun Shimomura, Minister sustainable Olympic Games held, of Education, Culture, Sports, Japan can make lasting contributions Science and Technology; in fields such as healthcare and urban Minister of the Tokyo Olympic development. It should also be able to and Paralympic Games

01: Yuki Ota, Olympics Silver Medalist, Morinaga & CO.,LTD. 02: Dai Tamesue, SAMURAI co., ltd. 03: Emmy Suzuki Harris, Japan Director, Change.org

Leveraging Collective Intelligence for Unprecedented Challenges 13 Japan’s National Transformation

stimulate new investment in the same The Olympics can be the impetus way the British government did with for inclusion, helping to give a boost “By 2020, we will double the London 2012 Olympics. Foreign not only to elite athletes, but also the export of Japanese food direct investment flows into Japan to youth. Planning and participation products. Rather than focus on are the lowest among Organisation should be as diverse as possible, the domestic, we will look to the for Economic Co-operation and including women, young people, the global food market.” Development (OECD) countries. elderly and disadvantaged groups. Japan should not forget the legacy But formidable tasks lie ahead. Japan of the Paralympics, and should make will need to address its labour shortage efforts to improve access for the elderly in certain industries, among them and the disabled. The nation has to services. To do this, a more open become more hospitable to foreigners, immigration policy will be required with bilingualism, especially the use of that smartly assesses the skills Japan good English, more widespread. Young needs, and that brings in the necessary people should be mobilized to drive workers in an orderly way, minimizing these changes. Time is of the essence; social and political tensions. Civil while the Tokyo 2020 Olympics are six society leaders called for an initiative to years away, that time can go by very turn Tokyo into a creative and cultural quickly, many participants warned. hub – a city where “the coolest people” from around the world want to live and Yoshimasa Hayashi, Minister work. of Agriculture, Forestry and Fisheries of Japan 01 02

“Japan clearly has the vision and leadership. The legacy of the Games is critically important. I am 150% sure that Japan will deliver.”

03

Sir Martin Sorrell, Chief Executive Officer, WPP

01: Japan Meeting 2014 Executive Dinner Reception 02: Japan Meeting 2014 Executive Dinner Reception 03: Heizo Takenaka, Director, Global Security Research Institute, Keio University, Yoko Ishikura, Professor Emeritus, Hitotsubashi University, Akira Tsuchiya Executive Director, World Economic Forum Japan, Hirotaka Takeuchi, Professor, Harvard Business School

14 World Economic Forum Japan Meeting Japan’s National Transformation

“In the past, policies for women were regarded as a human issue, not an economic one. But now it is an economic issue. It has become visible to men’s eyes.”

Enhancing diversity – closing illustrated the cultural and social Japan’s gender gap hurdles that must be overcome. When a female lawmaker spoke on the need Addressing gender inequality is a core for the local government to assist part of Prime Minister Abe’s reform women who are infertile or require Masako Mori, Minister of programme. In the growth package help raising children, male colleagues State for Gender Equality, released just days after the 2014 World taunted her out loud. Minister in charge of Support Economic Forum Japan Meeting, the for Women’s Empowerment Abe administration indicated it would A crucial step in addressing the and Child-Rearing, Cabinet introduce a new law that would give gender gap will be information Office of Japan incentives to companies as well as gathering, particularly at the microlevel the local and national governments – for example, what percentage of to promote women to leadership employees in a particular company “Gender parity is an issue not positions. It had already pledged to are women. Measuring the extent of just for women only but for men, improve childcare facilities and revise the gender gap at the enterprise level not just for large corporations or eliminate tax rules that discourage will make it clear where companies but for small and medium women from full-time employment. stand, and will allow for better-targeted enterprises, and for rural areas policies and remedies. as well as cities.” The prime minister aims to increase the proportion of women in managerial Within companies, measures have to positions to 30% by 2020. Increasing be taken to ensure that women are female participation in the workforce able to rise to leadership positions. is crucial if Japan is to develop Putting women in managerial roles new drivers of growth while facing and in the boardroom makes for better a shrinking workforce over the decision-making, human-resources coming decades. According to a specialists argue. But the path for “womenomics” report by Goldman Japanese women to senior positions Sachs, Japan could raise its gross is difficult, especially when it comes domestic product by as much as 13% to balancing career and home life. if it closed the gender employment This often makes women reluctant gap. Currently, the country has one of to take such jobs. Typically lacking the biggest gender gaps among OECD connections to the old boy network countries. that can help male counterparts, women should have easy access to Yoko Ishikura, Professor However, narrowing gender inequality the major business groups. Emeritus, Hitotsubashi will require not only new policies and University, Japan; Global measures to boost the participation Agenda Council on Education of women in the workplace, but also & Skills 2012-2014 a major shift in mindset for both managers and employers that will take time to achieve. A recent incident at the Tokyo Metropolitan Assembly

Leveraging Collective Intelligence for Unprecedented Challenges 15 Japan’s National Transformation

01

Addressing the lack of women of women. More childcare facilities, in a company will require strong particularly for after-school hours, are “Measurement and target commitment from top management critical. The government should make setting, awareness and training, and the board. Mentoring programmes it easier and less costly for Japanese incentives and accountability, can be helpful. Corporations, including to hire qualified caregivers, just as work environment and work- small to medium-sized enterprises, foreigners are able to do. There should life balance, leadership and should also look at their policies on also be efforts to equalize pay for equal company commitment – these paternity leave and on ways to get work. are practices we know that male employees to become more work.” involved in child-rearing. This will While participants lauded the Abe inevitably mean changing long-held administration’s decision to make work habits including overtime. The “womenomics” a central focus of its issue of sexual harassment should be reform programme, they concluded addressed and not swept under the that the gender gap in Japan will only office table. be eliminated once the challenge is regarded as much of an issue for men Business and government should as it is for women. examine ways to make workplaces 01: Japan’s Contribution to Global and Regional more diverse and more supportive Agendas : Innovation and Sustainability session 02: Kathy Koll Matsui, Co-Head, Asia Investment Research, Goldman Sachs Japan Co. Ltd 03: Philipp Rösler, Managing Director and Member of the Managing Board, World Economic Forum

02 03 Saadia Zahidi, Senior Director, Gender Parity, Human Capital and Constituents, World Economic Forum

16 World Economic Forum Japan Meeting Japan’s National Transformation

01: Shuhei Abe, “Women have no access to the 01 President, Chief Executive Officer and Group Chief old boy network. If we have Investment Officer, SPARX mentoring, this will change very Group Co. Ltd 02: Shoukei Matsumoto, rapidly.” Managing Director and Buddhist Monk, Japan Fellowship of Buddhists, Rikiya Abe, Professor, Presidential Endowed Chair of Digital Grid, University of Tokyo, Japan 03: Sakie T. Fukushima, President, G&S Global Advisors Inc. 04: Shinzo Abe, Prime Minister of Japan, Klaus Schwab, Founder and Executive Chairman, World Economic Forum

02

Etsuko May Okajima, Chief Executive Officer, ProNova

03 04

Leveraging Collective Intelligence for Unprecedented Challenges 17 “In the future, the distinction will be between high-innovation Japan’s countries and low-innovation ones. Japan’s challenge is to remain a high-innovation Contribution country.” to Global and Regional Agendas

Innovation and sustainability generation. This has given the country Klaus Schwab, Founder and an unparalleled level of experience Executive Chairman, World Despite volatility in world energy and expertise in energy efficiency, Economic Forum markets, one certainty is that energy especially in industry. demand over the next 40 years, including for fossil fuels, will continue Japan has been criticized for declining, “Global warming will be solved to grow. Thus, greater efforts are along with other countries, to join if technology prevails and needed to boost energy efficiency. As the Kyoto Protocol extension on Japanese technology is available one of the world’s leaders in energy greenhouse gas emissions. Others all over the world.” efficiency technology and practices, point out that Japan’s energy use has Japan must play a major role. Because climbed in recent years, and that it energy security is the country’s biggest has to do more to make homes and existential challenge – it depends buildings more energy efficient. Still, largely on imported sources of fuel the country has contributed to the fight – Japan has had to explore ways to against global warming by focusing on make consumption efficient and to enhancing energy efficiency through find alternatives to fossil fuels, such the use of technology in industry, and as geothermal energy for power on recycling.

01 02

Hideki Makihara, Parliamentary Vice-Minister of the Environment of Japan

01: Tomomi Nishimoto, Artistic Director and Principal Conductor, The IlluminArt Philharmonic Orchestra 02: Yasuhiro Sato, President and Chief Executive Officer, Mizuho Financial Group

18 World Economic Forum Japan Meeting Japan’s Contribution to Global and Regional Agendas

01 “We talk about an energy shortage, but we still have plenty of resources – sunlight, wind and biomass can be utilized.”

This opens the opportunity for Japan energy-consuming equipment to use to become a leader in promoting the technology for improving efficiency. circular economy, in which waste is Some countries including China are eliminated throughout the use and life copying or taking lessons from the Naoto Kan, Prime Minister of cycles of products and components. programme. Japan (2010-2011) This potentially game-changing concept could yield significant Japan can also take the lead in the gains through the re-engineering of development of solar, wind and supply chains to allow for the reuse biomass energy. In addition, it has of materials. Japan could become strong capabilities in product and a model for other countries in management innovation, such as procurement practices. through public-private partnerships, and can show the way in promoting Other countries could also learn from procurement and other processes 01: Victor L. L. Chu, Chairman and Chief Executive Japan’s Top Runner programme, that encourage efficiency. Japan can Officer, First Eastern Investment Group 02: Naoko Yamazaki, Member, Space Policy a regulatory initiative introduced in share this specific knowledge with Committee, Cabinet Office of Japan 1998 that focused on improving other Asian countries and the rest of 03: Christophe Duchatellier, Chief Executive Officer, Asia, Adecco Group end-use efficiency. The aim was to the world through technology transfers 04: John Pang, Visiting Scholar, NYU Stern Urbanization get manufacturers and importers of or international forums, or exchanges Project

02 03 04

Leveraging Collective Intelligence for Unprecedented Challenges 19 Japan’s Contribution to Global and Regional Agendas

between educational and research The Tokyo 2020 Olympics are the ideal institutions. Sony’s partnership with opportunity for Japan to showcase its “Japan’s leadership in energy the Japan International Cooperation energy-saving technology, capacity and resource efficiency is greatly Agency to bring renewable energy for innovation and commitment to felt around the world, especially solutions to Africa is an example of sustainability, particularly among its in China.” social innovations that can be driven by young people. Japan, for example, Japan’s technological capabilities. could convene a global meeting on innovation and sustainability.

01

Wu Changhua, Director, Greater China, Climate Group, People’s Republic of China; Global Agenda Council on Climate Change 2012- 2014

02

01: Tsutomu Kamegai, Gravity One 02: Scribe of North-East Asia’s Geopolitics and Geoeconomics Session by Tsutomu Kamegai

20 World Economic Forum Japan Meeting Japan’s Contribution to Global and Regional Agendas

North-East Asia’s geopolitics and More should be done, such as steps geoeconomics to improve trade and tourism. In 2013, “Nationalism and populism Japan joined the negotiations for the emerging in Japan and The relationship between Japan and TPP, the US-led trade framework that elsewhere are leading to a China is very strained, particularly over is a pillar of the American strategy to vicious cycle. This must be territorial disputes. Japan also has bolster ties in the region, but which stopped.” tense ties with its other neighbours, the some have regarded as an initiative Democratic People’s Republic of Korea aimed at China’s containment. and the Republic of Korea. Neither However, even in China, it is felt that China nor Japan appears to be doing the Chinese could eventually join the anything to step away from the brink TPP. While this would complicate the and avoid a military clash. Chinese talks, it would counter the exclusion actions in the South China Sea, which argument and could help bring Japan have inflamed relations with Vietnam and China together. and the Philippines, have raised questions about emerging nationalism Japan and China could convene a in China and its leadership’s intentions. joint panel to review their histories, In Japan, Prime Minister Abe’s visit to assess the controversies, find common the controversial Yasukuni Shrine and ground or even resolve differences. his moves to remove constitutional The territorial dispute souring ties constraints on the Japanese military could be made a lower priority, and Yoichi Funabashi, Chairman, have stirred concerns. not addressed through state-to-state Rebuild Japan Initiative talks (which may be difficult to conduct, Foundation, Japan; Global Meeting participants warned that the and only through parallel-track Agenda Council on Japan rise of nationalism and populism across diplomacy). Both countries could focus 2012-2014 East Asia is fuelling tensions that on enhancing educational exchange could lead to conflict or an unintended and collaboration on the environment. escalation. The tough geopolitical Japan could step up its sharing of “The world is going through climate is now having an impact on energy-efficiency technology with the biggest adjustment in the business, with Japanese investment China. The two nations could work international order since the end in China decreasing in recent months. together in development projects in of the Cold War. It is important Yet, small signs have appeared that Africa and South Asia, two regions of for us to have the wisdom to get both sides want to mend ties, including mutual interest. through this as peacefully as the scheduling of visits by officials. possible.”

01

Akihiko Tanaka, President, Japan International Cooperation Agency (JICA), Japan; Global Agenda 01: Yoshito Hori, President, GLOBIS University; Council on Japan 2012-2014 Managing Partner, GLOBIS Capital Partners; Chairman and Chief Executive Officer, GLOBIS Corporation

Leveraging Collective Intelligence for Unprecedented Challenges 21 Japan’s Contribution to Global and Regional Agendas

Scope appears to exist for adversaries the Japanese are uneasy about to discuss difficult topics, as Japan Prime Minister Abe’s tough stance, “It is crucial to strengthen and North Korea have launched offering a good foundation for building geopolitical cooperation in our discussions on the controversial issue strong people-to-people ties, with the region to sustain and advance of abducted Japanese citizens. The business community and youth taking our geoeconomic partnership.” key players, including the United the lead. The Tokyo 2020 Olympics, States, have to bear the responsibility and their preparations, could serve for peace and stability in the region. as a useful platform for emphasizing The United States plays a crucial shared values and the common hope balancing role and should take steps to of citizens in both countries of avoiding prevent a new cold war from emerging. conflict that would only threaten regional prosperity. Japan and China could build on the goodwill between their citizens, especially among youth. Hate speech may be prevalent in the blogosphere, and extremists on both sides stoke the flames of resentment. For the most part, however, young 01: Satoru Nishikawa, Vice-President, Japan Water Chinese, particularly in Hong Kong, Agency (JWA) Shen Dingli, Professor and are fascinated by Japanese and 02: Masa Inakage, Dean and Professor, Director, Keio Media Design Research Institute, Graduate School of Associate Dean, Institute of Korean popular culture. Moreover, Media Design, Keio Universit International Studies, Fudan University, People’s Republic 01 of China, Global Agenda Council on Nuclear, Biological & Chemical Weapons 2012- 2014

“There is growing animosity and a deterioration in political relationships in the region. It is of pressing importance for all players to address such uncertainty.”

02

Zhu Feng, Professor, School of International Studies, Peking University, People’s Republic of China

22 World Economic Forum Japan Meeting Japan’s Contribution to Global and Regional Agendas

Contributing to regional risk as mobile convenience stores to open educational programmes on disaster resilience quickly in disaster-hit areas. These preparedness and teach other products and practices can be shared countries about its system of school In a private meeting on 3 June 2014 with others. drills that have successfully limited convened by the Global Agenda the number of casualties during Council on Catastrophic Risks, During the discussion, participants earthquakes. Japan can also lend its Members of the World Economic considered what motives Japan should expertise in areas such as insurance Forum’s Japanese community have for assisting other countries and infrastructure. discussed the issue of risk resilience with disaster risk reduction. They in the context of responding to natural also examined strategies for the In March 2015, the United Nations disasters. Japan’s experience with private sector to share knowledge will convene a conference on disaster the earthquake, tsunami and nuclear and technological expertise with other risk reduction in Sendai, Japan, a city crisis of March 2011 that resulted nations. badly hit by the 2011 earthquake and in nearly 20,000 deaths placed the tsunami. This will be an opportunity for country in a position of responsibility. The motivation for helping is simple. the country, particularly its business Given its knowledge and expertise Aside from the moral imperative, not community and civil society groups, in disaster preparedness, response helping is not an option in a globalized to share ideas with other countries and rebuilding, Japan can help build world of interconnected supply chains. on disaster preparedness and risk the risk resilience of other countries, Providing assistance could ensure that resilience. particularly its immediate neighbours. supply chains essential to the assisting nation remain open or are quickly The contributions that Japan can re-established in the countries hit by make could be as straightforward a disaster. Helping neighbours builds as sharing technology or disaster- trust. response procedures and know-how. For example, gas meters are equipped Participants agreed that Japan should with sensors that shut off supply if an brand itself in the area of disaster earthquake is detected. Installed in all risk mitigation. Products including households, this system has meant gas meters with earthquake sensors, that dangerous gas leaks have not designed to mitigate risks associated occurred since the 2011 disaster. with natural disasters, should be a Warning devices have also saved lives major market opportunity. Japan by halting high-speed trains, preventing should also develop ways to share any derailments. Japanese companies its knowledge and experience, such implemented business continuity plans as through a website platform for that allowed for essential services such matching expertise. It could create

Leveraging Collective Intelligence for Unprecedented Challenges 23 Japan’s Contribution to Global and Regional Agendas

Designing a new social system and Collaboration, after all, is essential infrastructure to driving innovation – and Japan can derive significant benefits from As Japan aims to drive new growth, it sharing its expertise. Expanded trade is tapping its leading-edge capabilities and investment abroad, for example, in areas such as infrastructure could stimulate growth domestically. development, smart transport systems, Infrastructure has been and will continue energy-saving technology and social to be an area in which Japan can make solutions to keep elderly people leading a major contribution, especially in productive lives. Whether through countries where it has strong business innovations in financing or smart interests – the Republic of Korea, China, grids, Japan has proven its capacity Vietnam and other South-East Asian for solving problems. It can share its nations. know-how and approaches, especially with neighbours in the region that need better infrastructure and energy efficiency, and that must deal with ageing demographics.

01 “We are developing technologies and using this momentum to achieve a new stage of growth. We are now a front runner in problem solving. We would like to share our experience with the world.”

02

Toshimitsu Motegi, Minister for Economy, Trade and Industry of Japan

01: Yoshiaki Fujimori, President and Chief Executive Officer, LIXIL Group Corporation 02: Koichi Hamada, Special Adviser, Office of the Prime Minister of Japan

24 World Economic Forum Japan Meeting Japan’s Contribution to Global and Regional Agendas

01 02

Japan’s demographic challenge is putting its domestic house in order another area where it can lead the and deregulating and liberalizing its “For smart infrastructure, way in social innovations that turn markets, Japan will be in a better collaboration is critical.” the decrease in its population into an position to engage its partners and advantage. The country can take such become much more of a global player measures as revising the social security in those fields where it can have system to reduce the per-capita impact. The Tokyo 2020 Olympics burden, promoting lifelong learning could be just the motivational force to to prolong careers and enhance skills focus Japanese attention on achieving development, and raising or removing the vision of a reinvigorated country, retirement requirements to create a whose dynamism at home allows it to lifelong active society. project its strengths abroad.

Japan must focus on improving its But Japan’s transformation is still at own economic position to be in a an early stage. As Sadako Ogata, position to share its knowledge and Chairperson, World Economic Forum approaches with other countries. Japan advised, Japan still has to think For this reason, Prime Minister Abe’s about what it needs to change before Hiroaki Nakanishi, President, reform programme is critical. By worrying about how to change. Hitachi, Japan

03

01: Japan’s Contribution to Global and Regional Agen- das: North-East Asia’s Geopolitics and Geoeconomics session 02: Tamako Mitarai, Chief Executive Officer, Representa- tive Director, Kesennuma Knitting Co., Ltd. 03: Community Lunch

Leveraging Collective Intelligence for Unprecedented Challenges 25 New Social Structures to Support Paradigm Shifts

“To realize a workforce that We need to liberalize “Many older people remain is growing needs new quality infrastructure so that more motivated to continue working. infrastructure. In this area, Japan employment can be created. We should construct a lifelong is making a great contribution, active society.” including in financing.”

Donald P. Kanak, Chairman, Teruo Asada, Chairman, Atsushi Seike, President, Keio Prudential Corporation Asia, Marubeni Corporation, Japan University, Japan, Global Hong Kong SAR, Global Agenda Council on Ageing Agenda Council on Social 2012-2014 Security Systems 2012-2014

01: Japan’s Contribution to Global and Regional 01 Agendas: Designing New Social System and Infrastructure session 02: Timothy Latimore, Country Executive, Bank of America Group; President and Representative Director, Merrill Lynch Japan Securities Co. Ltd 03: Christopher Knight, Chief Executive Officer, Standard Chartered

02 03

26 World Economic Forum Japan Meeting New Social Structures to Support Paradigm Shifts

01: Glen Fukushima, 01 Senior Fellow, The Center “It is essential that we increase for American Progress retirement ages and get rid of 02: Sandra Wu Wen-Hsiu, Chairperson and Chief barriers such as mandatory Executive Officer, Kokusai retirement ages.” Kogyo Co. Ltd 03: Charles D. Lake II, Chairman and Representative, Aflac Japan 04: Hiroshi Mikitani, Chairman & CEO, Rakuten, Inc. 05: Richard Samans , Managing Director and Member of the Managing Board, World Economic Forum

02

Lord J. Adair Turner, Senior Fellow, Institute for New Economic Thinking (INET), United Kingdom

03 04 05

Leveraging Collective Intelligence for Unprecedented Challenges 27 Acknowledgements Further Information

The World Economic Forum wishes to thank the Government of Japan and the Forum’s Japanese community at large for their support of the 2014 World Regional Agenda Economic Forum Japan Meeting. World Economic Forum Japan Meeting The World Economic Forum recognizes the contribution and Leveraging Collective Intelligence for support of SBI Holdings as a Regional Partner, and Afl ac Unprecedented Challenges Roppongi Academyhills, Tokyo, Japan 2-3 June 2014

Japan and Hitachi as Regional Associates. August 2014

The World Economic Forum also thanks Congress Corporation, Dwango, JDC, Keio University, Mori Building, V-CUBE and other individual supporters for their help in preparing the Japan Meeting.

This report is also available to download in PDF or HTML format: http://www.weforum.org/japan2014/pdf http://www.weforum.org/ japan2014/html

28 World Economic Forum Japan Meeting Contributors

Akira Tsuchiya, Executive Director, World Economic Forum Japan

Alejandro Reyes, Writer Akira Sato, Photographer

Editing and Production: Floris Landi, Senior Graphic Designer, World Economic Forum Kamal Kimaoui, Director, Head of Production and Design, World Economic Forum Fabienne Stassen, Director, EditOr Proof

Leveraging Collective Intelligence for Unprecedented Challenges 29 The World Economic Forum is an international institution committed to improving the state of the world through public-private cooperation in the spirit of global citizenship. It engages with business, political, academic and other leaders of society to shape global, regional and industry agendas.

Incorporated as a not-for-profit foundation in 1971 and headquartered in Geneva, Switzerland, the Forum is independent, impartial and not tied to any interests. It cooperates closely with all leading international organizations.

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