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

Tue Jun 24, 2014 7:30am EDT
 
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By Tetsushi Kajimoto and Leika Kihara

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.   Continued...

 
Japan's Prime Minister Shinzo Abe speaks next to a teleprompter during a news conference at his official residence in Tokyo June 24, 2014.   REUTERS/Yuya Shino