Hiroshi Mikitani, CEO of e-retailer Rakuten and one of Japan’s richest men gave a speech at FCCJ(The Foreign Correspondents’ Club of Japan) as Representative Director of JANE(Japan Association of New Economy) about how information technology can be used to leverage “Abenomics” and help Japan’s growth strategy. JANE is the organization he founded reportedly as a challenge to Keidanren, or the Japan Business Association, the country’s most influential large corporate association.
Mikitani first showed a graph of average TOEIC(Test of English for International Communication) score improvement by 216.1 points from 526.2 point to 742.3, which is a result by Rakuten adopting English as a second language inside the company. He said he wants Rakuten to become a global business role model in and out of Japan, and that English is a must-qualification to achieve the goal. And he added that he is making a suggestion to the council to adopt English proficiency test as one of the entrance exams for Japanese Universities, which is one the most important competitiveness factors for Japanese businesses.
He pointed out what Japan lacks is not technology, but global business management capability and business innovation, adding that Japan has to graduate from the moratorium-like system that protects companies’ top management with low capability and no vision and to push ahead the renewal of the top management. Sheer cash provision to particular companies and industries are what he sees to cause moral hazard. Mikitani’s solutions are: first, deregulation should be executed for the market; second, competitive disadvantages imposed to Japanese companies should be fixed, including tax cut; Japan has to get out of the present Galapagos social environment and should join TPP(Trans-Pacific Strategic Economic Partnership).
He said that corporate tax rate in Japan should target the lowest level among the developed countries, suggesting the current corporate tax rate 39.1% of Tokyo including 2.5% of special tax for disaster relief, should be lower than targeted 25%. He also suggested global expansion and management capability actions to achieve Japan’s capability; first, joining TPP; second, accelerating the introduction of IFRS(International Financial Reporting Standards); third, increasing the quality of top business management and human resource.
Mikitani noted that Japan’s average TOEFL(Test of English as a Foreign Language) score was about the similar level as that of South Korea in 2005; but now South Korea ties with Hong Kong, where English is the official language. He remarked this change that South Korea made English education mandatory from 3rd grade since 1997, and started setting English-only classrooms in 2008 added with sending teachers abroad to enhance their English ability.
And questions and answers after the speech are as follow:
Q. Labor law in Japan has a lot of rules especially about retirement age and strict conditions for layoffs. Do you see there would be liquidity of higher level in the future?
A. This is a hidden but weighty agenda for the future. Japan is encouraging companies to adopt voluntary retirements with retirement bonus for the employees.
Q. Japan expects sales tax to increase and corporate tax to decrease. How much the business of Rakuten would be hurt or be beneficial by these changes? And how do you think these changes would affect Japanese people?
A. I don’t have the exact numbers for the effect on Rakuten, but personally I think the increase of sales tax will affect our company more than the decrease of corporate tax. And I would say Japanese people are prepared for higher consumption tax rate.
Q. Do you see any chance of Japan to go bilingual with English?
A. Yes, and I suggest we need to change the way to teach English. We need to re-increase the budget for English education, and need to change the entrance exam for Universities to include English proficiency tests.
Q. I think Japan is a cash-society. Do you think there are ways to let people use more credit cards or Paypal?
A. Rakuten accept credit cards for online payments; but it is those small businesses which do not accept credit cards. And in Japan, people tend to use other payment methods such as Suica and various point cards. South Korea is a good example of increasing the use of credit card after the IMF crisis; and it is much easier to track the consumption tax when using the credit cards than cash. I think Japan needs to create incentive programs for using credit cards such as point programs.