Prime Minister Shinzo Abe’s government finalized a new plan for economic growth Tuesday that is supposed to succeed where the first fell short — cutting Japan’s corporate tax and carving into entrenched regulations.
“The mission of Abenomics is to rev up a positive economic cycle and make Japan’s economic recovery felt in every corner of the country,” Abe told a news conference.
“Everything depends on carrying out this growth strategy,” he argued.
The strategy represents a follow-up to the Abe government’s first attempt at structural reform last year — the “third arrow” in his fight against low growth and deflation — and arguably makes some progress.
It calls for lowering the effective corporate tax rate for Japanese companies, which climbs as high as 35.64% in Tokyo, to the 20s over several years starting in fiscal 2015. Abe said the tax needs an overhaul to make it “growth-oriented.” The size of the cut and how to fund it will be decided by year’s end. In doing so, the government will weigh both Japan’s international competitiveness and its fiscal health, the prime minister said.
Abe insisted that the new growth strategy leaves “no taboos or sacred cows” and “breaks down every wall to let the Japanese economy’s potential blossom.” The proposed reforms include creating a “white-collar exemption” to the standard 40-hour workweek and expanding patients’ ability to combine nationally insured medical care with out-of-pocket treatments.
Japan will try to ensure its population remains above 100 million or so 50 years from now — the first such target set by Tokyo. The strategy calls for an all-out mobilization of pronatalist tax and social security measures by 2020, including support for families with three or more children.
To augment a shrinking labor force, the government wants to rethink an income tax deduction for dependent spouses that critics say robs women’s incentive to work. A vocational training program that lets developing-country nationals work in Japan will be expanded into new fields, with participants able to stay for five years instead of the current three.
While Abe called the new strategy a “powered-up” version of the first one, much of it is a work in progress, to be fleshed out during budget and tax policy deliberations later this year.