Mr. Abe’s ‘third arrow’ misses mark

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.

  • YoDude12

    “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.”

    Exactly my point, made in comments to other articles in this paper. The middle class will pay with higher commodity prices so that Abe’s buddies at Toyota, Toshiba, and TEPCO (that diamond in the rough), can wallow in profits, which won’t be shared with the vast, vast majority of the citizenry. You know, the recent college graduates who are taking highly sought after positions at Family Mart and Yoshinoya.
    Taxes are about to go up too, so that MPs can take their strategic planning trips (along with the executives of the aforementioned companies who they will work for when they leave public service), to Hainan or Pattaya.

    • paul

      Too little, late late, too expensive. The Japanese publc were conned at the last election. The previous government were headed in the right direction. The earthquake ruined their plans and looks like the country’s future too.

  • Spudator

    People should carefully scrutinize the actions of the Abe administration to prevent it from . . . making the rich richer while everyone else grows poorer.

    The increasing gap between rich and poor in Japan has been a problem for years now. I think it was about the time the economic bubble burst that homeless people living in cardboard boxes started to become a common sight in cities. They don’t seem to be as conspicuous these days, although that may be because they’re now living in hostels and shelters; but I bet they’re still around. One group that is conspicuous is the very rich, easily spottable as they swan around town in their Porches, Mercs and Maseratis.

    When I came to Japan back in the 80’s, I never saw such striking displays of poverty and wealth: no cardboard cities, no fancy wheels. Japanese people I knew would tell me that Japanese society was uniformly middle-class, although I took this with a pinch of salt, viewing it as yet another of those old chestnuts that the Japanese like to regale foreigners with. But now I have to wonder if they weren’t right.

    Twenty-first-century Japan is very much a country of haves and have-nots, and it seems to be linked to the broken economy, which has damaged the lives of ordinary people without any business or financial acumen and been a blessing to those who know how to take care of No. 1. Getting the economy working again has to be the only way to eliminate this dichotomy; but for that to happen, Japanese companies have to start making things the world wants, just like they used to. That may be difficult: I’m pretty sure a mere politician like Prime Minister Abe doesn’t know how to restore the relevancy of companies here, and—what’s worse—I don’t believe the stuck-in-the-1970’s execs running those companies do either.

    What Japan needs to save its bacon is a new breed of businessmen who understand how to run modern, high-tech companies. Maybe it can headhunt them from China, Korea and Taiwan.