The government adopted a 2007 economic policy package Tuesday that critics say reads like a grand wish list short on specifics, skips any hard talk about taxes until after the July election and merely vows to resolve the pension system debacle.
The package calls for greater productivity, international competitiveness and a narrowed gap in tax revenues between urban and rural areas, but analysts said the first such package by Prime Minister Shinzo Abe’s government since he took office in September lacks focus and leaves market players unmoved.
The package has a bulging 52 pages — much longer than the ones put together by his predecessor Junichiro Koizumi. But economists say it’s too broad and offers no specific ways to achieve its goals.
Koichi Haji, chief economist at NLI Research Institute in Japan, said the package covers a wide range of economic growth topics but delivers “no punch.”
Despite the need to secure tax revenues for surging social security costs to support the rapidly aging society, the package only says discussions on “drastic tax reforms,” including a consumption tax hike, will not start until fall, a clear indication that the government will not raise the tax hike specter before the crucial Upper House election.
On the pension fiasco, in which the government failed to keep proper track of more than 50 million pension premium payment records, resulting in pensioners receiving fewer benefits than they are entitled to, the package only vows the government “will win back people’s trust” by periodically reporting on its progress in matching the records with the right people and ensuring everyone receives their benefits in full. It also says the government will beef up telephone consultation services for the debacle.
The wording on the pension issue was changed at the last minute, apparently to quell mounting criticism of the Social Insurance Agency, the entity tasked with storing pension records.
A draft released last week only said the government “will swiftly and thoroughly deal with” the matter.
Elsewhere under the plan, Abe, whose public support rate continues to fall, aims to increase the country’s productivity by 50 percent in the next five years by making better use of IT technology and deregulation as the working population declines.
The plan calls for improving Japan’s international competitiveness by improving the quality of universities and allowing major international airports to operate 24 hours a day. It calls for enhanced competitiveness in financial and capital markets.
The government also wants to narrow the tax revenue gap between rural and urban areas, suggesting introduction of a “hometown tax” that would let taxpayers allocate some of their residential taxes to hometowns they no longer reside in. This option, too, is short on specifics, including a definition of “hometown” or how such tax transfers could be offset.
Yasunari Ueno, chief market economist at Mizuho Securities Japan Co., said Abe should focus more on domestic woes, including the pension snafu, especially in the runup to the election.
“Abe’s policies may be distant from the people’s daily lives,” he said.
Ueno said the package should show how the government will deal with the overall economy but noted it falls short. “Investors are not very interested in the package.”
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