The Abe administration on Wednesday announced a draft of the “third arrow” of its economic growth strategy. It consists of three pillars — a plan to resuscitate Japan’s industry, including increasing total capital investment by 10 percent in three years to reach ¥70 trillion, a plan to develop strategic markets, which range from health to energy and agriculture, and a plan to advance Japan into international markets, including Japan’s entry into the Trans-Pacific Partnership free trade scheme.
Prime Minister Shinzo Abe’s growth strategy contains few innovative ideas and differs little from growth programs announced by his predecessors. His strategy clearly attaches importance to deregulation and gives priority to strengthening major businesses, and is unlikely to directly benefit ordinary consumers.
The strategy contrasts sharply with the Democratic Party of Japan governments’ approach of first helping to stimulate consumption by households, thus creating demand that will lead to expanded economic activities by businesses. Mr. Abe hopes that deregulation and various assistance will encourage major businesses to develop new fields or increase their capital investment.
He believes that profits of major companies will trickle down to other companies and people. He should remember that although the trickle-down theory was followed by the previous Liberal Democratic Party governments, it did not work. Businesses made profits, but those profits did not lead to an increase in workers’ wages. Consumer spending did not increase and the percentage of irregular workers increased. The possibility cannot be ruled out that under the Abe administration’s growth strategy, only major corporations will increase their profits and that this does not bring sizable benefits to other companies and people at large in terms of increased wages and employment.
The growth strategy calls for establishing special economic zones mainly in major cities, accompanied by strong deregulation designed to create a business environment that matches New York and London. This could lead to further widening of the economic gap between megalopolis urban areas and other areas.
The strategy envisages Japan receiving orders from abroad for export of infrastructure technologies that will amount to about ¥30 trillion in 2020. The Abe administration treats export of nuclear power generation technologies and equipment as an important element in this infrastructure export policy. It is deplorable that the administration is pushing this policy at a time when the Fukushima nuclear crisis continues and no technology has been established to safely store high-level radioactive waste from nuclear power plants.
Mr. Abe set a new goal of boosting Japan’s per capita gross national income by more than ¥1.5 million in 10 years. People should not have an illusion that their income will increase that much. GNI includes income of both businesses and individuals. Achieving that goal is based on the assumption that the economy will grow 3 percent annually.
This is too ambitious for today’s Japan. People should carefully scrutinize the actions of the Abe administration to prevent it from adopting economic policies that will bring strains and distortions to the Japanese economy, making the rich richer while everyone else grows poorer.