Shinzo Abe Must Deliver Reforms if Abenomics is to Be Realized

After his first stint as prime minister ended in frustration and broken health in 2007, Shinzo Abe headed to a Buddhist temple and learned Zen meditation. As he prepares for three more years battling to reform Japan’s faltering economy, he’s going to need it.
The chaos in the legislature and public demonstrations that accompanied last week’s passage of his bills to expand the role of the military may be only a taste of what’s to follow for Abe as he turns his attention to an economy that has shown limited response to his efforts at revival. The changes needed to make the world’s third-biggest economy competitive again may face even bigger roadblocks.
“First of all, labor reform,” said Robert Feldman, chief economist at Morgan Stanley MUFG Securities in Tokyo. “We have a lot of talented people in the wrong jobs at the wrong wages. The reason for that is that we have labor laws that discourage labor mobility.”
While he has promised to drill away the bedrock of regulation hampering economic growth, in the labor market Abe has so far succeeded only in tweaking rules on temporary work. A bill introducing merit-based pay for higher-income white collar employees failed to pass amid labor-union fears that it would be extended to cover more of the population. Instead, the government has been distracted by months of ruckus over the defense bills.
“Reforms in these areas are considerably slower than people had expected,” said Hiromichi Shirakawa, chief Japan economist at Credit Suisse Group AG in Tokyo, who used to work at the Bank of Japan. “It’s disappointing.”

Via Bloomberg Business

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza