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Shinzo Abe

Japan's New Dawn

 

Japan’s economy has swung from negative to positive and is close to breaking free
TSI | Issue Dated: February 9, 2014, New Delhi
Tags : Shinzo Abe | Rice production adjustment |
 

For years, pundits called Japan the land of the setting sun. They said that for an economy as mature as Japan’s, growth would be impossible. They said that our public debt was unsustainable. They pointed to our supposed psyche of resignation as a symptom of relative decline.

But now such voices are rarely heard. Japan’s economy has swung from negative to positive growth and is on the verge of breaking free from chronic deflation. This spring, wages will increase – a long overdue development that will lead to greater consumption. Our fiscal position has also improved steadily, with my government on track to consolidate public finances.

And, as the economy has turned around, Japan’s people have become more vibrant and upbeat – a mood reflected in public enthusiasm over the choice of Tokyo to host the 2020 Olympic and Paralympic Games.

So it is not twilight, but a new dawn, that is breaking over Japan. And that is because we have overcome the notion that certain reforms could never be carried out. I have maintained that I am willing to act like a drill bit, strong enough to break through the solid rock of vested interests. And so we have.

For example, we will completely liberalize Japan’s electricity market. By the time the Olympians arrive in six years, the power sector will be fully competitive, with electricity generation separated from distribution.

We will also foster medical care as an industry. Japan is on the forefront of regenerative medicine, and we will make it possible to generate stem cells at private-sector labs. And I have just proposed additional reforms, because we also need large-scale health-care providers in the form of holding companies, much like America’s Mayo Clinic.

Moreover, we are eliminating the “Rice production adjustment” system, which has been in place for more than 40 years. Barriers to private companies’ entry into the agricultural sector will be removed, and farmers will be allowed to grow the crops they want, without official control over supply and demand.

Soon, our deregulation package will be set in motion. Over the next two years, in designated areas, no vested interests will remain impervious. For example, in Japanese cities aspiring to world-class status, limits on floor space will become a thing of the past. We will soon see high-quality housing, business complexes, and zero-emissions towns appearing, one after another.

Likewise, the Trans-Pacific Partnership (TPP) will remain a central pillar of my economic policies, and we will press ahead with the Japan-European Union Economic Partnership Agreement. As a result, Japan’s economy will become even more deeply integrated into global flows of knowledge, trade, and investment. Companies and people from abroad will find Japan among the most business-friendly places in the world.

Japan’s management of public funds – such as the Government Pension Investment Fund, which now holds about $1.2 trillion – will also undergo far-reaching change. We will press ahead with reforms, including a review of the GPIF’s portfolio, to ensure that public funds contribute to growth-nurturing investments.

We must also make our corporate taxes internationally competitive. In April, the tax rate on companies will fall by 2.4 percentage points. And we will put in place tax incentives aimed at encouraging companies to use their cash for capital investment, research and investment, and wage increases.

At the same time, we will reform labor-market rules that tie workers to old industries. New industries require innovative and creative human resources, and we will redirect our subsidies so that workers without meaningful employment in declining industries can move on and find rewarding work in rising sectors. Of course, given that Japan’s population is rapidly aging, and the number of children is falling, investors find themselves asking an obvious question: “Where will Japan find the innovative and creative human resources that it needs?”

I was greatly encouraged when Hillary Clinton told me that Japan’s GDP could be 16% larger if women participated in the labor market at the same rate as men. Indeed, Japan’s female labor force is the economy’s most underused resource. Japan must become a place where women shine. By 2020, we want women to occupy 30% of leading management positions – a goal that presupposes a more flexible working environment, as well as support from foreign workers to take over domestic and personal services. Japan has pledged that it will never again wage war, and we have never stopped working for a world that is at peace. It is my fervent hope that Japan’s economic revival, with its promise of increased global and regional prosperity, will help to bring such a world closer.   

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Issue Dated: Feb 5, 2017