Japan's Abe targets income gains in growth strategy

Wed Jun 5, 2013 6:58am EDT
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By Kaori Kaneko and Tetsushi Kajimoto

TOKYO (Reuters) - 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 third-biggest economy.

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 mobilize 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 skeptical the strategy would achieve the goals of the prime minister's "Abenomics" policy given a lack of bold steps, such as changes to promote labor 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."   Continued...

Japan's Prime Minister Shinzo Abe gestures as he delivers a speech at a seminar in Tokyo June 5, 2013. REUTERS/Toru Hanai