News Column

Abe unveils policy steps aimed at bolstering Japanese stock prices

June 16, 2014

The government of Prime Minister Shinzo Abe unveiled on Monday new policy measures it believes would benefit investors and companies, such as cutting Japan's relatively heavy corporate tax rate, with the aim of bolstering share prices at home.

In a draft of its revised economic growth strategy, the government promised to ease regulations in the agriculture, employment and health-care areas that have been criticized as preventing the country's deflation-beset economy from recuperating.

But it remains to be seen whether many of the policy proposals will be really achieved, given the nation's precarious fiscal health and lingering protests from the farm and medical sectors that have long been protected by the so-called "rock-hard regulations."

In the draft presented to a meeting of the Industrial Competitiveness Council on Monday, the government said it will reduce Japan's 35 percent corporate income tax rate -- compared with China's 25 percent and South Korea's roughly 24 percent -- to below 30 percent within a few years from fiscal 2015.

The proposed tax cut is designed to invigorate investment in Japan from abroad. The draft, however, did not show how to cover a possible decline in tax revenues in the wake of the tax cuts.

The Abe administration also requested that the Government Pension Investment Fund revise its investment portfolio currently dominated by domestic bonds, apparently urging it to purchase more risky assets and aiming to prompt foreign investors to buy Japanese stocks.

The GPIF -- which has 129 trillion yen in assets under management as of the end of last year -- is one of the world's largest institutional investors.

With fears growing that a shrinking population will bring about a shortage of workers, the government said it will enable foreigners to enter the fields of housekeeping and nursing care to help more Japanese women work outside the home.

Proposed reforms in the health-care sector included an expanded system of medical treatment combining insured and uninsured services based on patients' requests.

Employment-related deregulation focused on promotion of a merit-based pay system under the so-called white collar exemption so that specialists receiving annual pay of 10 million yen or more will be paid not for how long they work but for what they achieve.

In the agricultural sector, the draft called for an overhaul of the Central Union of Agricultural Cooperatives, the umbrella organization for agricultural cooperatives around the country, known as JA-Zenchu, and easing of restrictions on private companies' ownership in agricultural corporations.

With an eye on the future launch of the Trans-Pacific Partnership free trade accord, the government pledged to boost the scale of Japanese crop exports to 5 trillion yen by 2030.

The growth strategy is the "third arrow" of Abe's economic policies dubbed "Abenomics," along with aggressive monetary easing by the Bank of Japan and massive fiscal spending.

Abe's Cabinet, formed in December 2012, endorsed a growth strategy in June last year, but most of the policy proposals did not break new ground and triggered disappointment, forcing him to draft a revised version.

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Source: Japan Economic Newswire

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