Prime Minister Shinzo Abe outlined on Wednesday a sweeping blueprint for rejuvenating Japan’s ailing economy with reforms meant to bring more women into the workforce, promote industrial innovation and coax cash-hoarding corporations into investing more.
The strategies Abe sketched out in a speech form the third and most important plank in his “Abenomics” platform, which so far has focused on what he calls the first “two arrows” in his arsenal: loosening monetary policy and boosting public spending. He has promised structural reforms to underpin growth in the long run as Japan’s population ages and shrinks.
“Now is the time for Japan to be an engine for world economic recovery,” Abe said. “Japanese business, what is being asked is that you speed up. Do not fear risk, be determined and use your capacity for action.”
Without an overhaul of Japan’s bureaucracy and its agricultural, industrial and labour policies, economists say Abenomics is bound to provide only a temporary boost to growth while vastly increasing the country’s public debt burden. All agree that reforms are needed to break Japan free of the deflationary malaise that has stymied growth since its bubble economy collapsed more than 20 years ago and sustain growth in the future.
Investors appeared unimpressed: the benchmark Nikkei index, which had slipped 0.3 per cent in the morning ahead of the speech, was down 1.1 per cent just afterward. The Nikkei had gained over 70 per cent since November on expectations that Abe’s program would boost growth and corporate profits, but has lost nearly 20 per cent in the past few weeks on growing uncertainty over how well the plans are working.
Abe pledged on Wednesday to raise Japanese incomes by 3 per cent a year to protect consumers’ purchasing power if the government meets its target of boosting inflation to 2 per cent within two years. However, his speech was short on details of how to achieve that aim after more than two decades of economic stagnation.