1. Abenomics and the major achievements 1
Revitalize the Japanese Economy ~The Three Arrows~ 1. Bold monetary policy Price-stability target (2% inflation), within about two-year time frame. Double monetary base and JGB holdings in two years. Double average duration of purchased JGBs. Create inflationary expectations. End deflationary mindset. 2. Flexible fiscal policy 10tr fiscal stimulus package (FY2012 supplementary budget). 5.5tr fiscal stimulus package (FY2013 supplementary budget). Address downside risks to the economy, w/o issuing additional government bonds. 3. Growth strategy (Japan Revitalization Strategy) Maximize power of private sector through investment promotion, business restructuring and deregulation. Make best use of human potential by creating a society where all can participate. Create new frontiers through innovation and globalization. 2
Effects of Abenomics Emerging in the Real Economy Upward Trends Visible Across Principal Economic Indicators GDP Growth Rate The Japanese economy is expected to exit deflation and is on track for steady recovery. (%) GDP Growth Rate Key contributors 4.0 2.0 0.0 2.0 4.0 3.7 2.0 4.6 3.2 3.5 1.4 0.4 1.3 1.0 0.1 2.1 1.8 1.6 0.9 2.8 2.3 1.7 1.7 BOJ monetary easing Falling crude oil prices Anticipated real wage increases Improvements in employment and income conditions Key indicators Q1 2015: GDP +3.9% at an annual rate Rising for 2 quarters 6.0 Real growth rate Nominal growth rate Sources: Cabinet Office (actual) and Japan Center for Economic Research (forecast) 3
Effects of Abenomics Emerging in the Real Economy Upward Trends Visible Across Principal Economic Indicators Stock Market Stock price nearly doubles in recent 2 years (since the start of Abe administration in Dec 2012) and hits the highest record in recent 15 years. The number of IPO hits 77 in2014, growing for 5 consecutive years, 67% growth from 2012. (JPY) 21,000 Trends of Stock Price (Nikkei 225) 90 Number of IPOs 19,000 17,000 2012.12.26 JPY 10,236.36 80 70 60 46 (2012) 77 (2014) (+67%) 77 15,000 13,000 11,000 9,000 2015.7.27 JPY 20,328.89 (+99%) 50 40 30 20 10 49 19 22 36 46 54 source:nikkei Online 2012 2013 2014 2015 0 2008 2009 2010 2011 2012 2013 2014 source:vec yearbook 2015 4
Effects of Abenomics Emerging in the Real Economy Upward Trends Visible Across Principal Economic Indicators Corporate Profits Corporate profits have been growing steadily. (Trillion yen) 21 18 Transition of Current Earnings (Seasonally-adjusted figure) All Industries Manufacturing Non- Manufacturing 2015.1-3 16.4trillion yen 6.4% (compared to previous quarter) 15 12 9 6 3 Manufacturing Non-Manufacturing All Industries 0 1-3 4-6 7-9 10-12 1-3 4-6 7-9 10-12 1-3 4-6 7-9 10-12 1-3 4-6 7-9 10-12 1-3 11 12 13 14 15 Source: Financial Statements Statistics of Corporations by Industry (Ministry of Finance) 5
Effects of Abenomics Emerging in the Real Economy Upward Trends Visible Across Principal Economic Indicators Employee Income Corporate recovery is driving wage increases. The Spring Offensive resulted in a 2.23% average wage increase for FY2015. Source : Japanese Trade Union Confederation(2015.6/4 announced) 4 3 2 1 Gross income of employees (YoY) Real gross income of employees excluding impact of consumption tax increase Nominal gross income of employees 2.3 2.2 2.1 Trends of wage increase rate in the Spring Offensive 2.07 2.23 2.18 0 2.0-1 1.9-2 1.8-3 1.7 1.71-4 1 4 7 10 1 4 7 10 1 4 7 10 1 4 1.6 1.64 2012 13 14 15 1.5 Source: Job/employment placement services statistics (Ministry of Health, Labour and Welfare ) Labour Force Survey (Ministry of Internal Affairs and Communications ) Japanese Trade Union Confederation(2015.6/4announced) 06 07 08 09 10 11 12 13 14 15 6 General incorporated Foundations: Institute of Labor administration view of wage increase rate (2015.1/29announced
Effects of Abenomics Emerging in the Real Economy Upward Trends Visible Across Principal Economic Indicators Employment Unemployment rate is as low as 3.5% in 2015.1-3, which has come down to the level of Equilibrium of Unemployment. (%) 6 5 4 1997.7-9 3.4% Trends of Unemployment rate Unemployment Rate 2015.1-3 3.5% 3 2 1 Equilibrium of Unemployment Rate 2014.10-12 3.40% 0 Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 (Source)Ministry of Internal Affairs and Communications Labor Force Survey, Japan Institute for Labor Policy and Training Useful Labor Statistics Unemployment Rate : a ratio of unemployment people to labor force 7
Effects of Abenomics Emerging in the Real Economy Upward Trends Visible Across Principal Economic Indicators Foreign Direct Investment (FDI) Inward FDI is rapidly increasing more than 10 times between 2012 and 2014. Source: Ministry of Finance Japan's Balance of Payments 8
Effects of Abenomics Emerging in the Real Economy Upward Trends Visible Across Principal Economic Indicators Tourists visiting Japan In 2014, Japan's travel balance turns positive 1st time in 55 years. The number of tourists who visit Japan exceeds 13.4 million in 2014, as a result of the relaxation of visa application requirements to tourists. (Mil) 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 7.3 8.3 8.4 Tourist Visited Japan 6.8 8.6 6.2 2012-2014 +60% 8.4 10.4 13.4 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 (H1) 9.1 Source: Japan National Tourism Organization 9
Japan Revitalization Strategy 2015 Productivity Revolution by Investment for the Future Enhance Corporate Earning Power Reinforce proactive corporate actions by promoting a constructive dialogue between companies and investors. Growth-oriented corporate tax reform Promote ventures by bridging international hubs and domestic entrepreneurs. National University Reform to facilitate innovation. Promote economic partnership negotiations such as TPP and Japan-EU EPA. Accelerate Challenges to the New Era Facilitate the use of IoT, big data and AI Promote the utmost use of IT while ensuring cyber security. Develop Individual Potential Increase labor participation of women, the elderly and talented foreigners. Transform working styles by correcting long-hours work. Promote career development driven by individuals. Productivity Enhancement Everywhere - Local Abenomics - Enhance earning power of SMEs and micro enterprises. Improve productivity in the services industry. Leading Projects for 2020 Autonomous car, hydrogen society, advanced robots and others. 10
Japan s EPA/FTA Networks In Force Under Negotiation Japan-EU EPA Signed China-Japan-Korea FTA TPP ( Trans-Pacific Partnership ) Asia Asia In Force ( 13 countries and 1 region ) Singapore Malaysia Asia Viet Nam India Thailand Pacific Australia Indonesia Brunei ASEAN Latin America Mexico Chile Peru Philippines Europe Switzerland Signed ( 1 country ) Mongolia RCEP ( Regional Comprehensive Economic Partnership ) ( ASEAN, Japan, China, Korea, India, NZ and Aus. ) Asia Under Negotiation ( 3 countries and 5 regions ) C-J-K Europe EU RCEP ASEAN (Services and Investment Chapters, Substantial Conclusion) North America Latin America Canada Colombia Asia/ Pacific TPP Middle East Turkey <Others> Republic of Korea: Negotiations Suspended GCC (Gulf Cooperation Council: UAE, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia): Negotiations Postponed 11
2. Growth strategy and Israel 12
Initiatives for innovation and venture creation Reinforce measures to support creating global ventures. National University Reform Making the best use of globally competitive national universities resulting from the National University Reform as a global platform for creating ventures. Venture Challenge 2020 A project to show the capacity of creating innovation by 2020. Holding a Global Venture Summit in conjunction with Tokyo Olympic and Paralympic. 13
Realization of the most advanced ICT based society Reinforce the measures against cyber threats to protect the population and society Enhance abilities to respond to cyber threats (government and public institutions etc.)/ Protect My number system Encourage the actions of companies, creation of new industries, human resources capable of responding to cyber threats. Utilization of My Number System Enlarge the application scope - Census registration, residence report, transaction of stocks, in addition to deposit/saving accounts, and medical examination (after 2019). Promote utilization of My Number Card - Able to receive certificates such as resident cards, seal impressions, or family registers, at convenience stores from FY2016. - Integrate with health insurance card, credit card Introduction of online monitoring system - Provide one-stop service of procedures such as change of residential information, notice of death etc. through electronic post office box system, after Jan. 2017. Diffusion of ICT to the whole society Promotion of education on programming in primary/secondary/higher education Vitalization of competition in mobile phone sector, extension of the frequency band for IoT or drones An icon made by Freepik from www.flaticon.com is licensed under CC BY 3.0 New legal framework to be prepared Creation of an institution in charge of safe and security-ensured distribution of personal information Shift from the principle of documents /face-to-face interaction to that of ICT utilization Promotion of sharing economy, drones, autonomous cars etc. Promotion of ICT utilization in medical and nursing sectors Introduction of different number system in medical and nursing sector (to avoid information leakage, but linkage with My number system) and promote information exchanges in the sector Examine methods to evaluate effects of information exchanges at the next revision of medical treatment fees (effect of reducing medical expenses to be expected) 14
Israel as a global R&D Center Major global IT and manufacturing companies place R&D centers in Israel. 15
Venture Support Program in Japan INCJ (Innovation Network Corporation of Japan ) venture investment steadily increases. Under the Industrial Competitive Advantage Law, government qualifies the venture funds that have certain hands-on support abilities for venture businesses. Private companies can get tax deductions by investing in the qualified funds. Enables INCJ to accelerate venture investment with quick decision making. Amount ( 100M) 600 500 400 300 INCJ early stage investment trend (cumulative) Deals 35 Amount (left) 30 Deals (right) 25 20 15 Companies Tax Deduction Qualification Qualified Venture Funds Venture Businesses 200 100 0 FY2010 FY2011 FY2012 FY2013 FY2014 10 5 0 INCJ Enhance Venture Investment 16 16
VC Investments and Entrepreneurship Venture investment exceeds JPY 100B in 2014. Lack of entrepreneurship mind and skills (while Israel is extensively high). ( 100M) VC investment trend in Japan Entrepreneurship mind of Japan 1,400 1,200 1,000 800 600 400 200 0 2010 2011 2012 2013 2014 Source: Japan Venture Research 17