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Abe presents new ‘third arrow’ draft to competitiveness council

Kyodo

Prime Minister Shinzo Abe’s team on Monday unveiled more policies aimed at cheering companies and investors, including a plan to reduce corporate taxes, with the aim of raising share prices at home.

In a draft of Abe’s revised economic growth strategy, the “third arrow” of his deflation-fighting “Abenomics” program, the government promised to ease regulations in agriculture, employment and health care that have been criticized as preventing the deflation-mired economy from breaking away.

But it remains to be seen whether any of the proposals will become reality, given the nation’s precarious fiscal health, Abe’s inability to follow through on a plethora of previous structural reforms pushed while campaigning for the general election in 2012, and protests from the farm and medicine industries long shielded by “rock-hard regulations.”

In the draft, presented to the Industrial Competitiveness Council on Monday, the government said it will reduce Japan’s 35 percent corporate income tax rate to below 30 percent within a few years from fiscal 2015. China’s corporate tax rate is 25 percent and South Korea’s is roughly 24 percent.

The tax cut is designed to reinvigorate foreign investment in Japan, but the draft did not show how Abe intends to offset any decline in tax revenues following the reduction.

With fears growing that the nation’s shrinking population will exacerbate the labor shortage, the government also said it will allow foreigners to enter housekeeping, nursing care and other fields to help more Japanese women work outside home.

The Abe administration also requested that the massive Government Pension Investment Fund revise its portfolio, which is dominated by Japanese government bonds. The request is apparently being viewed as pressure to purchase more risky assets and to prompt foreign investors to buy Japanese stocks.

GPIF — which had ¥129 trillion in assets under management as of the end of last year — is one of the world’s largest institutional investors.

Another policy aimed at employment-related deregulation focused on promoting a merit-based pay system under the so-called white collar exemption so that specialists receiving annual pay of ¥10 million or more will be paid not for how long they work, but for what they achieve.