Stocks could surpass a level not seen since 2007 if the Abe administration pushes through in its drive to loosen business regulations, said Heizo Takenaka, a member of a government council on special economic zones.

"Stocks have surged considerably, but they can still improve if policies are implemented properly," Takenaka, 62, said in an interview Wednesday.

The Nikkei 225 stock average "could easily exceed 18,000 in light of Japan's economic strength," he said.