Japan PM's "Third Arrow" reforms seen short of overhaul

Japan PM's "Third Arrow" reforms seen short of overhaul

TOKYO - Anyone expecting a broad overhaul of Japan's economy that would remove barriers to competition will likely be disappointed when Prime Minister Shinzo Abe launches his "Third Arrow" policy next month, but those with more modest expectations may be pleased.

Abe has promised to make structural reform and deregulation a key part of his growth strategy, the third tranche of his"Abenomics" prescription after hyper-easy monetary policy and big spending.

The monetary and fiscal stimulus has already sparked Japan's fastest economic growth in a year in the first quarter, but corporate investment has yet to follow suit.

"The 'Third Arrow' was never going to be a magic bullet because deregulation means changing behaviour and moving from vested interests to new entrant investment," said Jesper Koll, head of Japanese equities research at JP Morgan in Tokyo.

"But they are pushing ahead. There is a growth strategy. The radical stuff is out and it was never going to be there, because you are in a country that is obsessed with creating a Japanese-style capitalism rather than market fundamentalist, Anglo-American-style capitalism. It's still Japan."

Some fresh details of the strategy could be revealed on Friday, when Abe is set to speak to business executives and academics. He unveiled some plans last month, including steps to make it easier for women to work.

Proposals by a panel on industrial competitiveness and another on regulatory reform are likely to form the bulk of the growth strategy. Abe, who took office in December after his Liberal Democratic Party's (LDP) election win, says he wants to announce the policy ahead of a June 17-18 Group of Eight summit in Northern Ireland.

Among proposals that are seen as positive are plans to deregulate the energy sector by breaking up utilities' grip on the generation, transmission and distribution of electricity; setting up a US-style National Institute of Health to consolidate and prioritise medical science investment, and Abe's decision in March to enter talks on a US-led free trade pact.

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