Japan seeks to join U.S.-led Pacific trade talks, reform hopes rise

Fri Mar 15, 2013 7:34am EDT
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By Kaori Kaneko

TOKYO (Reuters) - Prime Minister Shinzo Abe announced on Friday that Tokyo will seek to join talks on a U.S.-led Pacific free trade pact which proponents say will help tap vibrant regional growth, open Japan to tougher competition and create momentum for reforms needed to revive the long-stagnant economy.

The decision to join talks on the Trans-Pacific Partnership (TPP) launches the "third arrow" in Abe's policy triad following the fiscal pump priming and hyper-easy monetary measures he has pushed since returning to office in December after his Liberal Democratic Party's (LDP) big election win.

"Emerging countries in Asia are shifting to an open economy one after another. If Japan alone remains an inward-looking economy, there would be no chance for growth," Abe told a news conference.

"This is our last chance. If we miss this opportunity, Japan will be left behind."

The government estimates that joining the TPP will boost Japan's gross domestic product by 3.2 trillion yen ($33.3 billion), or 0.66 percentage points, offsetting the negative impact on agriculture by boosting exports in other sectors and domestic private consumption.

"Abenomics" has been playing to rave reviews in the Tokyo stock market and with voters, around 70 percent of whom support the prime minister.

Business executives and economists say the real test, though, will be whether Abe buckles down to more controversial reforms such as deregulation, which can hurt vested interests.

"TPP could be a trigger for Japan to implement deregulation in various sectors by using external pressure," said Hideo Kumamo, chief economist at Dai-ichi Life Research Institute.   Continued...

Japan's Prime Minister Shinzo Abe delivers his policy speech at the lower house of parliament in Tokyo February 28, 2013. REUTERS/Issei Kato