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Friday, July 17, 1998

Business association calls for radical government reforms


Staff writer

KARUIZAWA, Nagano Pref. -- To attract more companies, people and investment from abroad, Japan must implement a number of radical reforms ranging from taxation, corporate culture and disclosure to national politics toward the next century, business executives agreed Friday at the 13th summer seminar of the Japan Association of Corporate Executives (Keizai Doyukai).

During the two-day seminar, corporate executives discussed various issues based on this year's theme -- "What will Japanese society become in 2003, and what reforms will Japan need to realize in the next five years?"

Many of the participants, while stressing the need to consider raising the consumption tax, agreed that corporate and individual income taxes should be lowered. There were also voices supporting the introduction of criteria other than profitability in levying local corporate taxes.

"It is strange that out of the existing 2.4 million companies in Japan, 1.4 million are running in the red, and we will have to suspect why," said Koichi Minaguchi, adviser for Nomura Research Institute.

Regarding corporate management reforms, many said that firms should be more flexible in selecting their top management and more closely link rewards with corporate profitability. According to a survey of 20 top executives participating in the seminar, 15 responded that top management should be selected further in advance to provide future leaders with more experience and education. Three people said that top management should be brought in from outside the company.

Executives at the seminar also said that management should put more emphasis on their companies' share prices and that more disclosure is needed to relate performance to prices.

Regarding banks' bad loans, many participants supported the idea of disclosing the amount of so-called second-category nonperforming loans, described as "difficult to collect." The total amount should be disclosed to improve transparency, said Tatsuya Tamura, president of EDS Japan.

During a discussion on ways to nurture venture companies in Japan, Junichi Hattori, executive vice president of Seiko Instruments, said that venture companies do not succeed here because large corporations simply do not see their benefits.

"In the case of the United States, big companies try to purchase successful venture companies if they see potential in them. But in Japan, because they have more than enough employees in their firms, large companies just attempt to crush venture companies by competing with them," he said.



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