Arrow or Dart? Japan's Abe unveils latest reform plan

TOKYO Tue Jun 24, 2014 7:30am EDT

1 of 2. Japan's Prime Minister Shinzo Abe speaks next to a teleprompter during a news conference at his official residence in Tokyo June 24, 2014.

Credit: Reuters/Yuya Shino

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TOKYO (Reuters) - Prime Minister Shinzo Abe unveiled a package of measures on Tuesday aimed at boosting Japan's long-term economic growth, from phased-in corporate tax cuts to a bigger role for women and foreign workers, but applause from investors is likely to be muted after Tokyo backpedalled on bolder reforms.

Japan's economy has shown signs of revival since Abe took office 18 months ago pledging to end deflation and generate sustainable growth with a triple-pronged strategy he called his "Three Arrows", but policymakers acknowledge that more must be done to cement the recovery after two decades of stagnation.

"There are no taboos or sacred cows for my growth strategy," Abe told a news conference after the measures were approved by his cabinet.

He stressed that a "positive cycle" was emerging as rising corporate earnings lead to higher wages, but that the recovery had yet to spread to the regions.

Experts say Tuesday's update of the so-called "Third Arrow" of Abe's strategy to revitalise Japan - most of which had been trailed in advance - is a step in the right direction, but want to see how its reforms are fleshed out and implemented.

The first two "arrows" are massive monetary easing, which has helped push up asset prices, and fiscal spending to stimulate demand.

Private economists surveyed by Reuters forecast that the growth strategy could boost Japan's potential growth rate by 0.2-1.5 percentage points from its current level of around 0.5 percent. But they noted that it would take time.

"Even after the government growth strategy is announced, various legislation must be enacted and it will take time for companies to begin to act. Therefore, it will be 10 to 20 years before the potential growth rate rises," said Kenji Yumoto, vice chairman of the Japan Research Institute.

Yumoto said it was possible, but very difficult, for Japan to hit the 2 percent growth level the government says is needed to reduce its mammoth public debt.

DETAILS FOR LATER

The centrepieces of Abe's plan are a future cut in Japan's effective corporate tax rate - among the highest in the world - to below 30 percent over the next several years, and a promise to reform the $1.26 trillion Government Pension Investment Fund in ways likely to reallocate more money to the stock market.

The latest reform package is a welcome step for the Bank of Japan, which has called for bold government action to help sustain the current recovery fuelled in part by its massive monetary stimulus.

But many BOJ officials say the key now is implementation and Abe's commitment to meet words with action, so that companies feel confident enough to boost investment for the future.

BOJ Governor Haruhiko Kuroda, a former senior finance ministry bureaucrat, has also warned against cutting Japan's corporate tax rate without securing an alternative source of tax revenue, given the country's massive public debt.

In a nod to that need for balance, the tax plan will seek to offset the cuts by broadening the tax base.

But tough, key details of many steps were left to be worked out later and several bold but politically contentious proposals were watered down or omitted.

By dribbling out key elements of the package in recent weeks, the government hopes to avoid the disappointment that led to a sharp drop in Tokyo share prices when Abe announced the first instalment of his "Third Arrow" last June.

NOT AN "IMMIGRATION" POLICY

Earlier in the day, Abe urged the nation's business leaders to do more to boost the role of working women, a key plank in the growth strategy and seen as vital to address the shrinking workforce in one of the world's most rapidly ageing societies.

Abe's remarks came one day after a Tokyo assembly member from his ruling Liberal Democratic Party (LDP) had to apologise for heckling a female local lawmaker with sexist comments. The package also included steps to raise the number of highly skilled foreign workers and expand a controversial foreign trainee programme; boost productivity through a "robotic revolution"; and target the healthcare sector for growth.

But early bold proposals on agriculture reform look to have been watered down due to opposition from the powerful farm lobby.

And while experts say the goal of stabilising the declining population at around 100 million will be difficult to achieve, the government has gone out of its way to say moves to increase foreign workers are not an "immigration" policy.

"Considering the various difficult experiences in other countries, I think we must be cautious about accepting immigrants," Abe told the news conference.

Discussions on easing labour market rigidities to boost productivity yielded a plan to end paid overtime for workers earning the equivalent of at least $100,000 per year - only about 4 percent of the workforce. The touchy question of whether to make it easier to fire workers was left for later debate.

"Abe's 'Third Arrow' growth strategy seems to me like a dart not an arrow," said Naoki Iizuka, an economist at Citigroup Global Markets Japan. "I hope he will come up with bolder plans ahead."

(Additional reporting by Stanley White; Writing by Linda Sieg; Editing by Alex Richardson)

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Comments (2)
JSCD wrote:
For a country standing at the cliff and staring at the abyss, this is a case of too little, too late. The main story here is how oblivious Japan is to the huge problems facing it (declining competitiveness, low productivity, slow growth, terrible demographics, huge and growing debt, etc.). Abe would make an ostrich proud.

Jun 24, 2014 11:27am EDT  --  Report as abuse
Janeallen wrote:
Arrow or Dart, regardless.

– previously the Japanese Supreme Court had ruled the election of Abe unconstitutional after the cover up on another issue was raised and confirmed truthful within 8 days. New evidence shows that the faulty nature of the scientific concept behind freezing radioactive material — is exactly RIGHT ON. It is just proven not to be working this week on NHK— I warned that based on Physics principle, it could not possibly work– then I was >92% gagged and shut down since, but the wide eyed folks should remember what I had predicted.(Of course, non-scientists reporters had been misled since then due to the highly manipulative pandering of sympathy being misused to cover up lying politicians AGAINST the interest of people who truly need sympathy and support.)

Since then, unconstitutional moves by Biden, Kerry, Obama outsourced illegal activity to the Japanese top leaders; and Abe’s brother came to the United States to lie to Congress, misleading them on this decade’s version of “WMD” of this decades.

How on earth did Congress, the Senate, on both side of the aisles agree on moves after Abe, the grandson of a prominent ally of Adolf Hitler himself, no joke, sent his brother to brief Congress. And ALL the while, Congress had just re-erected Churchill’s statue after Abe distorted the words of one soulful American citizen, a victim of WWII legacy, and distort the words to mean exactly the opposite? How was all that accomplished? How can Boehner, McConnell, Reid and Pelosi, Kerry and McCain, Biden and McCarthy alike start clearing up the fogged up lenses of their eyes, and wake up to the reality of how they had been deluded, misled, against the most fundamental principles of democracy? How did Merkel get co-opted into cover up that seem increasingly against the interest of Germany, the good name of the country which has been praised for facing up the past honorably and setting up a multi-ethnic democracy briskly and successfully?

Dart or Arrow will be irrelevant if the economic efforts are further derailed by continuous, unremitting efforts to violate First Amendment rights of U.S. citizens by Japan, insightful honorable Americans who voiced honest, real, important concerns for decades.

Economic Nobel Prize Winner(recently deceased), Klein, had warned of the risk of recession and recommended, among others, the need of Japan to incorporate more women in its work force. This was well chronicled in economic forums on East Asian Economics back in the early 1990s. Japanese economists, and Japanese political scientists such as Fukuyama dismissed all the warning signs arrogantly, rejected the list of recommendations, YET received disproportional trust and support by most mainstream academic institutions, hence, the U.S. and Japanese government, as well as most journalists. The predictions of Japanese economists and politicians have been proven wrong — soundly so. Yet, world leaders still fail to learn from the lesson? Why?

Why the reluctance to face truth, complete truth?
What’s the reason for the fear?
Are the major world leaders fearful that the political structure of their top democracies are not strong enough to face truth? If not that fear, what other fear? What other fears?

Klein has been proven correct. Yet, even on Charlie Rose, Abe is made to be the initiator of women’s right to work, rather than the one who had put down, denigrated, and dismissed Klein’s suggestion to increase the percentage of women in Japan’s workforce for over 2 decades. Klein’s recommendation is available to public library users because it is documented in proceedings of major economic forums from the early 1990s. After ALL that, Abe is facetiously pretending to be the vanguard of women’s right to work. THAT IS DESPICABLE!

HOW, and I say it again, HOW can anyone who ever claim to support women’s right, support, promote, and trust a top group of politicians who had repeatedly acted with such deceit(albeit very skillful deceit, still deceit) about the true impetus of any of their policies?

On a separate note, after outsourcing the illegal activities, the Japanese court wisely paved the way for possible unveiling of future scandals by maintaining a legal avenue to take down Abe’s Government while saving face. America, Boehner, as well as the S Ct, have not paved the way yet for the full disclosure of the whole truth, nothing but the truth. Are these people wise?

Japan’s economy has great potentials. However, the way Abe followed the blue print of what seemed to work, just prior to WWI and WWII, is very unwise. The world is much wiser. Some of the dirty secrets around and before WWI, as well as WWII, have not been unveiled, until only the last 2 decades. Mass media, technology have made it no longer possible for Japan to hide secrets for 120 years before they start getting unveiled enough for ordinary folks like me to react with “wows” and “oohs”!

The saying, “what goes around comes around” is right. But sometimes, the cycle is 120 years or more!

Jun 26, 2014 3:32pm EDT  --  Report as abuse
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