Abe’s Third Arrow Could Clash with His Second One

Prime Minister Shinzo Abe’s Cabinet endorsed Tuesday its revamped economic growth strategy and longer-term policy blueprint, including proposals it believes will help the corporate sector and Japanese share prices.

In the strategy, the government pledged to promote deregulation in the farm, employment and medical areas, all of which have been criticized as preventing Japan from beating deflation for nearly two decades.

Skepticism, however, is growing about whether many of the proposals can be implemented and protests have come from the agriculture and health-care sectors that have long been protected by so-called rock-hard regulations.

The government also promised to cut Japan’s 35 percent corporate tax rate to below 30 percent within a few years from fiscal 2015, as requested by business leaders, arguing the tax rate has curtailed foreign direct investment in the country.

But the tax proposal has some fearing Japan’s fiscal health, worst among developed economies, may deteriorate as the government has yet to decide how to cover a possible decline in tax revenues following a corporate tax cut.

The growth strategy, in which the government expresses eagerness to bolster the “earning power” of Japanese companies, was approved by Abe’s Liberal Democratic Party earlier Tuesday.

via Mainichi

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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