05-06-2013, 11:38 PM
Its the market that can't get out of the shadow of Japan's economic ghost not Abe. As in any revolution, the details will be lacking for a start but the determination especially for a homogenous population like Japan must never be ruled out...
http://www.afr.com/p/world/bold_japan_re...AkcDByWLVP
Bold Japan revival plan fails to convince
PUBLISHED: 05 JUN 2013 19:56:00 | UPDATED: 05 JUN 2013 21:22:20
SHARE LINKS:email
• inShare
•
•
•
• submit
print-font+font
Reprints & permissions
Japanese Prime Minister Shinzo Abe announced his structural reform plan on Wednesday, in an apparent bid to calm two weeks of sharemarket weakness and volatile bond market trading. Photo AP
GREG EARL Asia-Pacific editor
KEY POINTS
The plan sets a target of 3 per cent nominal growth over the next decade.
It aims to boost productivity and develop new markets in new industries.
It promises greater labour force efficiency.
Financial markets have responded sceptically to the much-anticipated third leg of Japan’s economic recovery strategy, in another sign of rising nervousness about the government’s ability to implement the plan.
Prime Minister Shinzo Abe announced his structural reform plan in Parliament on Wednesday, earlier than expected, in an apparent bid to calm two weeks of sharemarket weakness and volatile bond market trading.
The sweeping blueprint to revive the world’s third biggest economy after two decades of stagnation aims to boost productivity, develop new markets in new industries and overseas and revamp the labour force through greater efficiency and inclusiveness.
It sets a target of 3 per cent nominal growth over the next decade, compared with a small contraction over recent years, and a 33 per cent increase per capita over that time.
Fast growth in Japan could increase exports to Australia’s second-largest trading partner and deregulation would open up new business opportunities for services exporters.
Mr Abe wants 70 per cent of Japan’s trade to be covered by free-trade agreements by 2018, compared with 19 per cent now, which will raise hopes that a trade deal with Australia will be the first to be concluded. “For 20 long years of deflation, Japan suffered a deep loss of confidence,” Mr Abe said. “It is now time for Japan to become an engine of global economic growth.”
But analysts said the real impact of the promised reforms could not be judged until they were implemented, although the market reaction reflected disappointment at lack of detail.
SHAREMARKET FELL OVER 3PC
The sharemarket fell more than 3 per cent and the yen rose, contrary to the government’s policy aim, in a reflection of its status as a safe haven asset in times of financial uncertainty.
“The yen is swayed by the movement in equity prices,” Aozora Bank trader Akira Moroga told Bloomberg. “Stocks which rose in anticipation of Abe’s growth strategy were sold off after the announcement lacked any concise measures.”
After rising 80 per cent since Mr Abe promoted his reform plans in last November’s election campaign, the sharemarket had already lost 15 per cent in the past two weeks due to concerns abut the viability of the plans.
The promised reforms hit powerful support groups of the ruling conservative party – farmers and doctors – with plans to allow industrial ownership of farmland and some deregulation of medical treatment and pharmaceutical distribution. The number of companies involved in agriculture is projected to quadruple by 2020, potentially reducing the power of ordinary farmers to prevent tariff cuts.
LABOUR MARKET FLEXIBILITY TO BE IMPROVED
Labour market flexibility will be improved by shifting tax breaks for companies to retain workers during downturns to improved training allowances.
Mr Abe committed to funding more childcare centres to bring more women into the workforce and encourage more women to seek senior executive positions in companies. Companies are also being encouraged to merge to improve efficiency and overcome the decline in global competitiveness for Japan’s once-dominant manufactured exports.
Government officials said Mr Abe backed corporate tax breaks for new investment and research and development, although details of these proposals would be announced in the future due to their impact on the budget.
READ NEXT:
Greg Earl | More details needed on changes
More details needed on changes
Analysis Greg Earl Asia-Pacific editor
544 words
6 Jun 2013
The Australian Financial Review
AFNR
English
Copyright 2013. Fairfax Media Management Pty Limited.
Hitting the bull's-eye with the much promised third arrow in Shinzo Abe's economic recovery plan was always going to be harder than the first two shots he has fired.
And the less than enthusiastic response in the markets to the structural reform program announced on Wednesday has only underlined that the Japanese Prime Minister has had a remarkable honeymoon with normally cynical investors and political commentators so far this year.
February's fiscal stimulus was of mixed quality and had little to distinguish it from previous efforts to buy some life in an economy with excess capacity.
The March monetary policy quantitative easing designed to secure 2 per cent inflation was a much more serious effort at changing the economic ground rules but is facing its first serious hurdle, with rising rates threatening a growth recovery.
Neither of the first two arrows will provide anything more than a brief growth spurt without serious structural reform, but the problem is that Wednesday's parliamentary speech lacks the details needed to provide real confidence in the reforms.
The modest measures to allow companies to restructure and lay off workers will hardly result in a dramatic change to a stratified labour force of jobs for life on one hand and totally freelance work on the other.
Abe will have to take an unusually hands-on role to force headline reforms through the thicket of vested interest in sectors such as health and agriculture.
Despite these reservations, there is no doubt that Abe has made his unusual return to his country's leadership like a man who has learnt a lot from his past failures.
All the signs are that he is on track to win public endorsement of his promised reform plans at an upper house election next month, which will be an achievement in a country which has been turning over prime ministers at the rate of one a year since 2006. However, there is still considerable risk that after the election Abe will be diverted from the hard work of long-term structural economic reform by his deeper interests in constitutional and cultural issues.
And while Wednesday's third arrow should always have been seen as the most important and the most difficult of the three-pronged reform program, the threshold test of whether Japan really has its economic management act together is still to come.
That will be in the fourth quarter, when the government must decide whether to go ahead with an already legislated doubling of the sales tax just when the first fruits of its stimulus strategy should be emerging.
The tax revenue, equal to about 5 per cent of GDP, is needed to stop the fiscal rot and public debt accumulation from more than a decade of wasted stimulus. But it will be at odds with the more considered stimulus program this year.
It will truly be Hobson's choice with a potential negative market reaction either way.
So Abe has about three months to ensure there is real confidence in the durability of his third arrow reforms to allow him to make the fiscally responsible decision to push ahead with the tax rise.
Fairfax Media Management Pty Limited
Document AFNR000020130605e9660003q
http://www.afr.com/p/world/bold_japan_re...AkcDByWLVP
Bold Japan revival plan fails to convince
PUBLISHED: 05 JUN 2013 19:56:00 | UPDATED: 05 JUN 2013 21:22:20
SHARE LINKS:email
• inShare
•
•
•
• submit
print-font+font
Reprints & permissions
Japanese Prime Minister Shinzo Abe announced his structural reform plan on Wednesday, in an apparent bid to calm two weeks of sharemarket weakness and volatile bond market trading. Photo AP
GREG EARL Asia-Pacific editor
KEY POINTS
The plan sets a target of 3 per cent nominal growth over the next decade.
It aims to boost productivity and develop new markets in new industries.
It promises greater labour force efficiency.
Financial markets have responded sceptically to the much-anticipated third leg of Japan’s economic recovery strategy, in another sign of rising nervousness about the government’s ability to implement the plan.
Prime Minister Shinzo Abe announced his structural reform plan in Parliament on Wednesday, earlier than expected, in an apparent bid to calm two weeks of sharemarket weakness and volatile bond market trading.
The sweeping blueprint to revive the world’s third biggest economy after two decades of stagnation aims to boost productivity, develop new markets in new industries and overseas and revamp the labour force through greater efficiency and inclusiveness.
It sets a target of 3 per cent nominal growth over the next decade, compared with a small contraction over recent years, and a 33 per cent increase per capita over that time.
Fast growth in Japan could increase exports to Australia’s second-largest trading partner and deregulation would open up new business opportunities for services exporters.
Mr Abe wants 70 per cent of Japan’s trade to be covered by free-trade agreements by 2018, compared with 19 per cent now, which will raise hopes that a trade deal with Australia will be the first to be concluded. “For 20 long years of deflation, Japan suffered a deep loss of confidence,” Mr Abe said. “It is now time for Japan to become an engine of global economic growth.”
But analysts said the real impact of the promised reforms could not be judged until they were implemented, although the market reaction reflected disappointment at lack of detail.
SHAREMARKET FELL OVER 3PC
The sharemarket fell more than 3 per cent and the yen rose, contrary to the government’s policy aim, in a reflection of its status as a safe haven asset in times of financial uncertainty.
“The yen is swayed by the movement in equity prices,” Aozora Bank trader Akira Moroga told Bloomberg. “Stocks which rose in anticipation of Abe’s growth strategy were sold off after the announcement lacked any concise measures.”
After rising 80 per cent since Mr Abe promoted his reform plans in last November’s election campaign, the sharemarket had already lost 15 per cent in the past two weeks due to concerns abut the viability of the plans.
The promised reforms hit powerful support groups of the ruling conservative party – farmers and doctors – with plans to allow industrial ownership of farmland and some deregulation of medical treatment and pharmaceutical distribution. The number of companies involved in agriculture is projected to quadruple by 2020, potentially reducing the power of ordinary farmers to prevent tariff cuts.
LABOUR MARKET FLEXIBILITY TO BE IMPROVED
Labour market flexibility will be improved by shifting tax breaks for companies to retain workers during downturns to improved training allowances.
Mr Abe committed to funding more childcare centres to bring more women into the workforce and encourage more women to seek senior executive positions in companies. Companies are also being encouraged to merge to improve efficiency and overcome the decline in global competitiveness for Japan’s once-dominant manufactured exports.
Government officials said Mr Abe backed corporate tax breaks for new investment and research and development, although details of these proposals would be announced in the future due to their impact on the budget.
READ NEXT:
Greg Earl | More details needed on changes
More details needed on changes
Analysis Greg Earl Asia-Pacific editor
544 words
6 Jun 2013
The Australian Financial Review
AFNR
English
Copyright 2013. Fairfax Media Management Pty Limited.
Hitting the bull's-eye with the much promised third arrow in Shinzo Abe's economic recovery plan was always going to be harder than the first two shots he has fired.
And the less than enthusiastic response in the markets to the structural reform program announced on Wednesday has only underlined that the Japanese Prime Minister has had a remarkable honeymoon with normally cynical investors and political commentators so far this year.
February's fiscal stimulus was of mixed quality and had little to distinguish it from previous efforts to buy some life in an economy with excess capacity.
The March monetary policy quantitative easing designed to secure 2 per cent inflation was a much more serious effort at changing the economic ground rules but is facing its first serious hurdle, with rising rates threatening a growth recovery.
Neither of the first two arrows will provide anything more than a brief growth spurt without serious structural reform, but the problem is that Wednesday's parliamentary speech lacks the details needed to provide real confidence in the reforms.
The modest measures to allow companies to restructure and lay off workers will hardly result in a dramatic change to a stratified labour force of jobs for life on one hand and totally freelance work on the other.
Abe will have to take an unusually hands-on role to force headline reforms through the thicket of vested interest in sectors such as health and agriculture.
Despite these reservations, there is no doubt that Abe has made his unusual return to his country's leadership like a man who has learnt a lot from his past failures.
All the signs are that he is on track to win public endorsement of his promised reform plans at an upper house election next month, which will be an achievement in a country which has been turning over prime ministers at the rate of one a year since 2006. However, there is still considerable risk that after the election Abe will be diverted from the hard work of long-term structural economic reform by his deeper interests in constitutional and cultural issues.
And while Wednesday's third arrow should always have been seen as the most important and the most difficult of the three-pronged reform program, the threshold test of whether Japan really has its economic management act together is still to come.
That will be in the fourth quarter, when the government must decide whether to go ahead with an already legislated doubling of the sales tax just when the first fruits of its stimulus strategy should be emerging.
The tax revenue, equal to about 5 per cent of GDP, is needed to stop the fiscal rot and public debt accumulation from more than a decade of wasted stimulus. But it will be at odds with the more considered stimulus program this year.
It will truly be Hobson's choice with a potential negative market reaction either way.
So Abe has about three months to ensure there is real confidence in the durability of his third arrow reforms to allow him to make the fiscally responsible decision to push ahead with the tax rise.
Fairfax Media Management Pty Limited
Document AFNR000020130605e9660003q