Abenomics and the Government’s New Growth Strategy

Politics Oct 28, 2013

The Diet convened for an extraordinary session on October 15. Prime Minister Abe Shinzō is determined to use this session to pass legislature to support his new national growth strategy. Major aims include a bill to boost Japan’s industrial competitiveness, which will be essential for the success of the prime minister’s “Abenomics” program and growth strategy.

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The autumn session of the Diet convened on October 15, 2013. The extraordinary session is expected to run until early December, as members work to hammer out a budget for the next fiscal year, beginning in April 2014.

Abe Shinzō, the prime minister, has called this session the “Growth Strategy Implementation Diet.” The government will look to pass several important pieces of legislation. One of these would approve plans to start a new state security body similar to the National Security Council in the United States. Debate on this proposal has been ongoing for some time. The government has also submitted legislature designed to strengthen Japan’s industrial competitiveness, which it sees as essential to the success of the “Abenomics” program. As part of this, the government will try to get the Diet to approve lower taxes on capital investment.

The government’s “Japan Revitalization Strategy” was approved by the cabinet in June. Designed to be the “third arrow” of the prime minister’s “Abenomics” program, the strategy comprises three broad action plans, along with some concrete targets and measures to bring them about. A government website provides the following English translations for the three main pillars of the strategy: (1) Plan for the Revitalization of Japanese Industry, (2) Strategic Market Creation Plan, and (3) Strategy of Global Outreach.

On October 1, the cabinet officially announced that the rate of the consumption tax will increase next April, from 5% to 8%. At the same time, the government said it would take the necessary measures to ensure that the hike does not throttle economic growth. Opposition parties will look to harry the government on its economic policies and press it to be more proactive in responding to the leaks of radioactive water at the crippled nuclear power plant in Fukushima.

Highlights of the Government’s New Growth Strategy (Japan Revitalization Strategy)

Growth Strategy: Aims and Targets

Three main “arrows” make up the government’s plan to revitalize the Japanese economy: (1) bold monetary relaxation, (2) flexible application of fiscal stimulus, and (3) a growth strategy for arousing private investment.

Together, these policies aim to bring the economy out of its long deflationary spiral. The government is targeting average nominal GDP growth of approximately 3% for the next 10 years, and an average of 2% growth in real GDP. The aim is for an increase of at least ¥1.5 million in per capita gross national income in ten years’ time.

Area	Main growth targets included in the Japan Revitalization Strategy
Private sector revitalization	Maximize the potential of the private sector by reducing the burden on corporations through cuts to investment taxes. Capital investment: Back to ¥70 trillion in three years’ time. Make it easier for entrepreneurs to start new companies, and for unsuccessful businesses to fail. Increase business startup/closure rate to around 10%, on par with USA and UK. Increase number of SMEs in the black, from 700,000 to 1.4 million (2020) 10,000 new companies to expand overseas in the next five years
Business environment	Establish national strategic special zones to bring in international investment Lift Japan’s ranking from 15th to 3rd place among industrialized countries on the Ease of Doing Business Index Review systems to allow foreign doctors to practice in Japan Energize financial and capital markets: Develop the No. 1 market in Asia
Commerce and globalization	Increase FTA ratio from current 19% to 70% (by 2018) Infrastructure spending: Combined total for public and private sectors from approx. ¥10 trillion at present to ¥30 trillion (2020) Export value of SMEs to double from 2010 values by 2020 Cool Japan: Threefold increase in value of overseas sales of broadcast content from ¥6.3 billion at present (2018) Number of foreign tourists visiting Japan: From 10 million in 2013 to 30 million by 2030
Agriculture, forestry, and fisheries	Exports of agricultural, forestry, fisheries products, and foods: from ¥450 billion at present to ¥1 trillion (2020) Value of “sixth-order” industries: Tenfold increase to ¥10 trillion (2020) Double total income of agriculture and farming villages over the next ten years
Employment, women’s issues, training	Reduce the number of people unemployed for 6 months or more by 20% in the next five years Percentage of women in work (ages 25–44): Increase from 68% at present to 73% (2020) World university rankings: At least ten universities in the Top 100 within the next ten years Internationally competitive human resources: Double the number of Japanese studying abroad by 2020 (from 60,000 to 120,000)
Energy	Developing the energy industry: Market to be worth ¥26 trillion by 2020 Reform electricity supply systems: Create ¥16 trillion worth of new industry, new employment Introduction of renewable energy: New regulations and reforms of current systems Commercial development of the marine resources that will provide the energy of the future
Healthcare and medicine	Expand the health and preventative medicine market: From ¥4 trillion at present to ¥10 trillion in 2020 Scale of medical market: From ¥12 trillion at present to ¥16 trillion (2020) Establish a national institute of health to exercise central control over medical research and development Lift prohibition on online sales of conventional medical products

(Compiled by Nippon.com based on the Japan Revitalization Strategy decided at a cabinet meeting on June 14.)

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