- POSTED: 24 Jun 2014 19:12
Japanese Prime Minister Shinzo Abe unveiled a fresh round of reforms Tuesday, in the latest bid to cement a fragile recovery, his second attempt to fire the "third arrow" of his economic action plan.
TOKYO: Japanese Prime Minister Shinzo Abe unveiled a fresh round of reforms Tuesday, in the latest bid to cement a fragile recovery, his second attempt to fire the "third arrow" of his economic action plan.
In a package that has already been heavily trailed, he promised to slash Japan's corporate tax rate -- one of the world's highest at up to 36 per cent -- and tackle sectors long sheltered by the state.
"The government decided today to make our growth strategy more powerful in a bold manner. The key is to revitalise local communities," Abe told reporters in a press conference that was televised live.
"There is neither a taboo nor a sanctuary in the Abe government's growth strategy. We will resolutely challenge rock-hard regulations and institutions.
"The Abe cabinet will break all barriers so that we can realise the potential of the Japanese economy," Abe said.
The plan is Abe's latest stab at making good on the final tranche of his growth strategy, dubbed "Abenomics", which started in early 2013 with a huge public spending spree and an unprecedented monetary easing campaign by the Bank of Japan.
That gave the economy a shot in the arm and set off a stock market rally as firms' profitability grew on the back of a sharply weaker yen.
But a growing chorus over recent months has called for action, saying as the sugar rush of cheap money wears off, the lack of real structural reform could prove problematic for an economy that has stumbled through more than two decades of disappointment.
"A virtuous circle of the economy is emerging as corporate profits are leading to expansion of employment and rises in wages," Abe said.
"Abenomics takes it upon itself to continue expanding the virtuous cycle."
The plan calls for a review of the nation's huge public pension fund portfolio, worth a staggering US$1.26 trillion, urging it to make more aggressive investments in foreign and domestic stock markets.
The hope, say commentators, is that this massive fund will lead by example and encourage other funds to plough into stocks and to demand more and better quality returns from the companies they invest in.
Among other initiatives are a scheme to promote clean energy, robotic technology and the tourism industries, while establishing special economic zones.
Japan's rigid labour market is to be tinkered with to loosen permanent residency rules for some manual workers and promote managerial jobs for women.
However, the relatively large-scale immigration seen in other wealthy countries is a no-go; an influx of foreigners is anathema to Japan's largely conservative public and initial talk of a huge policy change has been toned down.
Abe is also calling for more childcare support, partially as a way of encouraging women to have more babies, as the body politic grapples with a shrinking and ageing society.
His much-touted first attempt at a package of structural reforms fell flat last summer, with critics saying they were too timid and not doing enough to take on Japan's many vested interests.
This year, the premier also faces a delicate balancing act as ordinary citizens struggle with lacklustre wage growth and rising prices for everyday goods -- the result of Tokyo's bid to stoke long-absent inflation as well as April's consumption tax hike to 8.0 per cent from 5.0 per cent.