Japanese Prime Minister Shinzo Abe outlined yesterday a sweeping blueprint for rejuvenating Japan’s ailing economy with reforms meant to bring more women into the workforce, promote industrial innovation and coax cash-hoarding corporations into investing more.
The strategies Abe sketched out in a speech form the third and most important plank in his “Abenomics” platform, which so far has focused on what he calls the first “two arrows” in his arsenal: loosening monetary policy and boosting public spending. He has promised structural reforms to underpin growth in the long run as Japan’s population ages and shrinks.
“Now is the time for Japan to be an engine for world economic recovery,” Abe said. “Japanese business, what is being asked is that you speed up. Do not fear risk, be determined and use your capacity for action.”
He pledged to raise Japanese incomes by 3 percent a year to protect consumers’ purchasing power if the government meets its target of boosting inflation to 2 percent within two years. He also promised to raise Japan’s per capita gross national income by more than ￥1.5 million (US$14,970) in 10 years. It now is about US$45,000 a year.
So far the government has taken only piecemeal initiatives such as loosening controls on online sales of over-the-counter drugs. Abe intends to raise private investment in roads and to set up “strategic economic zones” where private companies will be allowed to operate public facilities such as airports.
Abe has repeatedly stressed his desire to encourage more women to work by improving access to affordable childcare and extending parental leave. He also has called for improved English-language instruction and loosening of labor regulations that discourage job hopping. He did not discuss details of those plans in his speech.
Tokyo stocks tumbled 3.83 percent to close at a two-month low yesterday as dealers were left disappointed by Abe’s latest plans to kickstart the country’s economy.
The benchmark Nikkei 225 Stock Average fell 518.89 points to 13,014.87, its worst finish since early April, while the TOPIX index of all first-section issues lost 3.15 percent, or 35.44 points, to 1,090.03.
As Abe outlined his measures to stoke growth in the world’s third largest economy, stock prices fell while the US dollar slipped below ￥100.
“I didn’t expect much out of this but there wasn’t much indeed,” JPMorgan Securities Japan senior economist Masamichi Adachi said, referring to Abe’s speech.
“There are a series of meaningless figures. I don’t know how they can achieve them,” he told Dow Jones Newswires.
Japan’s economy grew at a 3.5 percent annual rate in the first quarter, while a weakening yen helped boost the repatriated profits of big Japanese corporations.
However, despite rising costs for imported energy and food, overall prices have remained flat, and despite massive purchases of government bonds meant to pump cash into the economy, the central bank remains far from achieving its 2 percent target for inflation.
Though most economists have given Abe’s initial efforts a thumbs-up, it is the longer-term reforms that will really count, they say.
“One thing is certain about growth policy: there is no silver bullet or panacea,” Waseda University’s Masazumi Wakatabe said.
“In particular, contrary to the popular view, industrial policy has rarely worked in Japan or in other countries,” Wakatabe added.