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Tuesday, June 16, 2009
The all-powerful voice of corporate Japan
Since its founding, the Japan Business Federation (Nippon Keidanren) has been the nation's most powerful business lobby and its head is often called "the prime minister of the business world."
For most of the postwar period, the organization has represented the voice of big business in Japan and has been a strong supporter of the ruling Liberal Democratic Party. But as its membership expanded to include smaller businesses and foreign companies, and as scandals forced the organization to stop soliciting donations from member firms to fund political parties, its role has changed.
In April, its headquarters relocated to a new 23-story building from an office built in 1966, marking a fresh start.
Following are questions and answers about the powerful lobby for corporate Japan:
What is Nippon Keidanren and when was it established?
The Japan Federation of Economic Organizations (Keidanren) was established Aug. 16, 1946, a year after Japan's surrender, because the Occupation authorities had banned Japan from creating a business organization for one year.
The body was created to gather the opinions of businesses and to have their views reflected in the government's economic and other policies.
Unlike the United States, Japan does not have a culture of "individual lobbying," in which each company lobbies politicians, according to Nippon Keidanren Director General Yoshio Nakamura. Instead, it is more common for companies to "collectively" lobby through Nippon Keidanren, considering this route more effective, he said.
What other major business organizations are there in Japan?
Besides Nippon Keidanren, there is the Japan Chamber of Commerce and Industry and the Japan Association of Corporate Executives (Keizai Doyukai), but Nippon Keidanren is by far the top lobby.
There was also the Japan Federation of Employers' Associations (Nikkeiren), which was established in 1948 initially to deal with labor-management issues. But because its membership basically overlapped Keidanren's and as Keidanren began to deal with labor-related and social security issues, the two groups merged to become Nippon Keidanren in May 2002.
How many members does it have and how much is the fee?
Nippon Keidanren had 1,609 member companies and organizations as of the end of May. It takes in about ¥6 billion in revenues a year, mostly from membership fees. The fees are based on net assets and thus vary from member to member between 33 different levels, according to Nippon Keidanren.
The highest fee is reportedly more than ¥10 million a year, although the levels are not officially disclosed. Companies that pay the highest level reportedly include Toyota Motor Corp.
Does a company need to be a big Japanese firm to join Nippon Keidanren?
No. It used to be comprised of major Japanese businesses and influential industry organizations, but in recent years more foreign companies as well as venture businesses and nonbanking institutions have joined. As of May 28, 84 foreign companies, including pharmaceutical firm Pfizer Japan Inc. and U.S. financial institution Goldman Sachs Group, were members.
Keidanren watchers say membership has reflected Japan's economic development over the years. For example, immediately after the war, steel and auto industries were active members. But following the oil crisis in the 1970s, retailer Aeon Co. as well as high-tech firms including Matsushita Electric Industrial Co. (the current Panasonic Corp.) and Hitachi Ltd. joined.
In the late 1980s, Recruit Co. and security firm Secom Co. joined, representing the inclusion of new industries.
Aspiring members must first be screened by Nippon Keidanren's secretariat, and then the application must be approved at a meeting of the chairman and vice chairmen.
How is Nippon Keidanren structured? What does the secretariat do?
Nippon Keidanren has about 200 employees, or members of the secretariat, with the director general at the top. They are often referred to as "minryo" (private-sector bureaucrats), a group of elites from the nation's top universities who serve as the brains of the organization. Nippon Keidanren's policy proposals are drafted by the secretariat and compiled by various committees represented by its members.
Who are the current chairman and vice chairmen?
Fujio Mitarai, head of Canon Inc., is the chairman. There are 15 vice chairmen who are presidents or chairmen of Japan's major companies, including Nomura Holdings, Inc. and Toyota. Vice chairmen are from companies in various sectors, including financial and manufacturing, as well as utilities.
Are Keidanren chairmen always from big corporations?
No rule stipulates this, but all of the chairmen have come from big corporations except Kogoro Uemura, who was a former bureaucrat who joined Keidanren's secretariat.
Does Nippon Keidanren contribute to political parties?
It does not provide political donations directly. It used to solicit member companies to give funds to the LDP and now-defunct Democratic Socialist Party (Minshato), but it stopped doing so in 1993 under Chairman Gaishi Hiraiwa amid political corruption scandals, including the earlier Recruit stock-for-favors affair.
In 2004, Nippon Keidanren introduced a policy evaluation system for the LDP and the Democratic Party of Japan as a reference for its member companies in making political donations. The system grades the parties every year from A to E based on their policies.
Before 1993, political donations by member firms to the LDP would top ¥10 billion a year, but they plunged to about ¥2 billion at one time and now hover around ¥3 billion, Keidanren sources said.
What will happen if the DPJ comes to power?
According to Nippon Keidanren's Nakamura, the business lobby traditionally supported the LDP to ensure its policy priorities were addressed.
"But it all depends on what kind of policy the DPJ hammers out," Nakamura said. "We'll make a policy-oriented decision."
In fact, earlier this month, DPJ President Yukio Hatoyama and Nippon Keidanren Chairman Mitarai met to discuss policies. However, differences over such issues as the consumption tax and greenhouse gas reduction target were left unresolved.
What are Nippon Keidanren's policy goals?
The group wants tax and social security reforms carried out simultaneously to rein in mounting welfare costs.
In policy proposals in February, it urged the government to raise the consumption tax to 10 percent by fiscal 2015 and gradually hike it to 17 percent by fiscal 2025.
"If we don't begin dealing with the problem now, we will be left with a huge structural problem in 20 years or so," Nakamura said.
The group also urged the government to ensure the nation has adequate human resources, regardless of their nationality, and ease the criteria for granting permanent residency to foreigners.