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Markets not impressed with Japan's growth plans


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Markets not impressed with Japan's growth plans

Japan’s Prime Minister Shinzo Abe has unveiled his latest growth strategy moves, to a muted response.

They include a pledge to boost incomes by three percent annually. He also hopes to attract foreign businesses with tax cuts and less red tape in special economic zones in Tokyo and other big cities.

But financial markets remain unsure about the effectiveness of Abe’s economic reforms.

He insisted it will take time: “To turn two decades of stagnation into ten years of recovery we will need daring, openness, innovation and action. With this growth plan we will completely turn around the Japanese economy, dragging the nation out of stagnation and into recovery.”

Analysts said wages will have to move higher to revitalise Japan after years of entrenched deflation and decades of being in the economic doldrums.

Share prices fell in Tokyo as disappointed investors were hoping for more specific growth policies.

The prime minister made no mention of a proposal to encourage Japan’s public funds to seek higher returns by investing more in riskier assets like shares.

Investors have not given up hope that Abe’s policies will end the country’s prolonged economic stagnation, but a note of caution has crept in since Tokyo share prices began to slide on May 23 after months of heady gains.

The stock price falls are also a worry to Abe’s government ahead of a July 21 upper house election his party needs to win to cement his grip on power.

Japan’s economy did expand in the first quarter at the fastest pace in a year, outstripping growth in the United States, as Abe pursued his fiscal spending and aggressive monetary stimulus.

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