Series: Understanding Japan through Key Words (Part2)
Japan's Revised Economic Growth Strategy
Japan's Revised Economic Growth Strategy
Adopted by Cabinet decision in June, this is a revised version of a package of policy measures designed to revitalize the Japanese economy. When it was first announced a year ago, the strategy was slated by many analysts as failing to break new ground, and stock prices plummeted. The revised version aims to convince markets of the government's commitment to tackling highly-regulated areas such as employment and labor, agriculture and healthcare.
The Abenomics suite of economic measures pursued by the Abe administration comprises the "three arrows" of aggressive monetary easing, flexible fiscal stimulus, and structural reforms to stimulate private sector investment. In April 2013, the Bank of Japan announced that it would pursue qualitative and quantitative monetary easing, and the government too has unveiled a cumulative 200 trillion yen in fiscal stimulus spending since the launch of the second Abe administration. The remaining challenge was to develop a growth strategy. Unlike monetary policy and budgets, which can-within limits-be formulated as necessary, growth strategies require groundwork, such as revising relevant legislation and coordinating different interests, and achieving targets inevitably takes time. These factors mean a huge difference in the speed of execution compared to the first two "arrows".
In the revised strategy, the Abe administration has brought corporate reform to the top of its agenda, committing to "lowering the effective corporate tax rate to the 20 percent level in several years from fiscal 2015." Prime Minister Abe was determined to institute this cut, overriding opposition from the Liberal Democratic Party's Tax System Research Commission and the Ministry of Finance, which wanted to avoid tax cuts in order to reduce the budget deficit.
Companies might reap the benefits of a reduced tax rate, but the revised strategy also contains a "stick". To ensure that profit is ploughed back into capital investment, higher wages and dividends, arrangements for investor oversight need to be moved quickly into place. The strategy calls for companies to create codes of corporate governance that lay out principles for corporate behavior by mid-2015, boost management transparency by appointing independent external directors, and push harder to get women into management positions. For employment and labor, a "white-collar exemption" has been introduced which removes the upper limit on work hours for high-income earners with annual salaries of 10 million yen or more. Remuneration will be paid on a results basis. Responding to strong labor union concern that this will increase unpaid overtime, the government has set up a government-labor-management council comprising representatives from labor and economic circles to look properly into the matter. For agricultural reform, the Central Union of Agricultural Cooperatives, which is the umbrella organization for local agricultural cooperatives, will be overhauled, reducing its powers to give more autonomy to local cooperatives. Specific measures will be worked out among the administration and the ruling and opposition parties by the end of the year.
For healthcare, the government will expand the so-called "mixed medical treatment" system. Combining treatments covered by public health insurance with treatments that are not is in principle banned. However, if patients request advanced treatments with no precedent in Japan, the government will decide whether to approve them within six weeks, rather than the traditional screening period of six months.
In addition, to lighten the load on double-income households, the after-school care program will be expanded to take more children and regulations will be relaxed to allow the entry of foreign nationals to provide domestic services in special economic zones. The government will also work to popularize fuel-cell electric vehicles and robots. While this dazzling array of policies promises a bright future, implementing them in their entirety will be an absolute condition in winning the high support rating that the Abe administration seeks.
(original article : Japanese)
*This article was written by a specialist journalist.