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 Abe took office 18 months ago pledging to end deflation and generate
sustainable growth with a three-pronged strategy of monetary easing,
fiscal spending and reform.
Experts say the latest instalment of his so-called "Third Arrow" of
long-term economic policies, most of which had been trailed in
advance, is a step in the right direction, but want to see how they
are fleshed out and implemented.
Private economists surveyed by Reuters forecast that the plan 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.
Among the steps outlined so far is 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.
Abe's reform package is a welcome move for the Bank of Japan, which
has called for bold government to help sustain the current recovery
fueled 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.
BALANCING ACT, DETAILS OMITTED
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 have been 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.
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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.
In a meeting with business executives, Abe urged companies to set
targets for promoting female workers to senior jobs and disclose
information on progress in annual earnings reports.
Abe's remarks came one day after a Tokyo assembly member from his
ruling Liberal Democratic Party (LDP) had to apologize for heckling
a female local lawmaker with sexist comments.
Also included in the package are 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.
Early bold proposals on agriculture reform look to have been watered
down due to opposition from the powerful farm lobby, while the
government has gone out of its way to say moves to increase foreign
workers are not an "immigration" policy.
Discussions on easing labor market rigidities to boost productivity
looked set to yield 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 is likely to be 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 Leika Kihara; Writing by Linda Sieg;
Editing by Alex Richardson)
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