* Income boost vital for success of "Abenomics"
* Tokyo stocks sag, yen strengthens after PM's speech
* Special economic zones to attract foreign businesses
* Experts to review public funds investment strategies
By Kaori Kaneko and Tetsushi Kajimoto
TOKYO, June 5 Prime Minister Shinzo Abe pledged
to raise incomes by 3 percent annually and set up special
economic zones to attract foreign businesses in the third
tranche of measures aimed at boosting growth in the world's
Abe is also considering a push for public pensions and other
public funds - a pool of $2 trillion - to increase returns by
raising investment in equities, a government draft growth
strategy showed, confirming a Reuters report.
The government will seek the view of experts and aim to
reach a conclusion by autumn, the draft said. Still, such a move
could face opposition from Japan's risk-averse voters.
The steps are the last batch of proposals in a growth
strategy that includes measures to mobilise women in the
workforce, boost private investment and deregulate some sectors.
The package is set to be approved by the cabinet on June 14
along with macro-economic policy guidelines including fiscal
reform targets to address Japan's massive public debt.
However, some analysts were sceptical the strategy would
achieve the goals of the prime minister's "Abenomics" policy
given a lack of bold steps, such as changes to promote labour
market flexibility and make it easier for companies to exit
dying businesses while shifting to growth areas.
Tokyo share prices fell 3.8 percent on the day, partly on
disappointment over Abe's speech.
"The government has come up with rosy numerical targets but
I doubt any of these could be met or that such a targeting
policy could work out as planned," said Hideo Kumano, chief
economist at Dai-ichi Life Research Institute. "After all, the
government cannot control every economic activity just like the
central bank cannot control long-term interest rates."
"'Abenomics' should not lean toward a planned economy and
market players are attaching greater importance to deregulation,
not these numerical targets."
ABE'S "THIRD ARROW"
The Bank of Japan's sweeping monetary expansion, announced
in April, aims to achieve 2 percent inflation in less than 2
years. Analysts say wages will need to rise faster to put
consumer prices and growth on a sustainable upward track.
Abe is wary of appearing to benefit corporations over
consumers ahead of a July 21 upper house election, but he is
also reluctant to take bold steps that might hurt backers of his
conservative Liberal Democratic Party (LDP).
"I think the most important target to achieve is per capita
gross national income," Abe said in a speech on Wednesday to
unveil steps aimed at engineering long-term growth.
"That's because the aim of our growth strategy is nothing
other than to create jobs for enthusiastic people and raise
take-home pay for those who are working hard.
"In short, to let households benefit. That's the point."
The growth strategy is the "Third Arrow" in his "Abenomics"
prescription to end deflation and spur sustainable growth. The
first two "arrows" are hyper-easy monetary policy and big
The popular premier, who took office in December after his
party's big election win, said he would target annual gains of 3
percent or more in gross national income per capita. That would
be an increase of 1.5 million yen ($15,000) over 10 years from
around 3.84 million yen in 2012.
The Nikkei's fall on Wednesday continued a slide begun on
May 23, as investors turned cautious after a rally of more than
50 percent that saw the market reach a 5-1/2 year high.
The yen rose as high as 99.37 to the dollar after trading
around 100 yen against the dollar earlier in the day,
having fallen to 4-1/2-year low of 103.74 yen late last month.
"The comments from Abe lacked some of the detail the market
had been looking for and left it disappointed," said Ian
Stannard, head of European FX strategy at Morgan Stanley.
A pull back in Japanese share prices is a worry for Abe
ahead of the July election, which his party is expected to win
but needs to do so decisively to cement its grip on power.
HARD TO HIT TARGET?
Some analysts said that it was hard to see how the income
gain target could be reached - especially if, as expected, the
growth plan eventually includes steps that would make it easier
to use temporary workers, who tend to be lower paid.
Others held out hope of more reforms down the road.
"From labour market reform to business investment and
deregulation, the growth strategy is going in the right
direction, but it lacks bold steps such as facilitating labour
mobility, immigration and corporate tax cuts," said Masayuki
Kichikawa, chief Japan economist at Bank of America Merrill
Lynch. "I guess contentious issues may need to wait until after
the upper house election."
Abe added more targets to those he has already announced,
aiming to boost power-related investment one and a half times to
30 trillion yen over the next decade and double the balance of
inward foreign direct investment to 35 trillion yen by 2020.
The special economic zones, to be created in Tokyo and other
big cities, are expected to be allowed to introduce corporate
tax cuts and ease regulations to attract businesses.
Abe also said the government would allow the sale over the
Internet of most over-the-counter drugs as part of efforts to
mobilise the Internet for growth.
Japan has already vowed to target private-sector investment
of 70 trillion yen annually, the level before the 2008 financial
crisis and up about 10 percent from current levels.
The government also aims to triple infrastructure exports,
such as bullet trains and nuclear plants, to 30 trillion yen.
It wants to double farm exports by 2020 and have 70 percent
of exports covered by free trade deals by 2018, compared with
around 19 percent now, by pushing participation in the U.S.-led
Trans-Pacific Economic Partnership (TPP) and other trade deals.