politics

Abe's 'Third Arrow' reforms short of overhaul

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By Linda Sieg and Kaori Kaneko

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But it is likely to put off steps to ease barriers to corporate investment in farming in a nod to a heavily protected farm lobby, already upset by Abe’s decision to join talks on the U.S.-led Transpacific Trade Partnership pact.

Just have to wait and see just how "upset" the farm lobby is when the elections roll around in July. Traditionally the LDP has counted on the agriculture sector, the farmers, to prop them up and keep them in office with their votes.

If they are truly upset, more likely angry and pissed off, like many of my friends and acquaintances who are farmers say, and are already talking about not voting for LDP candidates because of Abe's decision about TPP, the LDP and Abe could very well be facing a much tougher election than expected.

But seeing as how the popularity of Abe, vs not much of a viable option besides the LDP exists right now in Japanese politics, the LDP will probably win, and if the status quo remains, expect the international community to respond right quick.

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This is the one area where expectations should be low.

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Yubaru - I bet the farmers will not be all that upset since Abe is promising to double their incomes over the next decade...and if anyone can expect payoff for their electorate clout - it is the farming lobby. Besides , there is no alternative party for the farmers to really vote for. Despite their grumblings they are firmly in the LDP,s bag....July will be another landslide for Abe.

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Anyone expecting a broad overhaul of Japan’s economy that would remove barriers to competition will likely be disappointed

Thomson Reuters needs to do some homework before writing an article. Abe's 3rd arrow is named "Growth". His idea is that growth of Japanese economy is possible by ending deflation and inducing inflation. Now, how would deregulation and more competition bring the price of goods "upward"? What is good during inflation is not so good during deflation. The news agency needs to get rid of its mind set developed during inflation.

His growth strategy is a collection of incubation of new industries. Planned deregulation is limited to areas that enable development of new industries.

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The third arrow in Shinzo Abe's quiver had better be a good one, although I strongly suspect it wont be enough. Historically, policy intitiatives in Japan have proven ineffective in dealing with the persistent sub-par growth and deflation issues. The reason for this is simple. Most of the issues that would need to change in order to make Japan more efficient and competitive reside in the corporate sector, and there is precious little the government can do to legislate their way to meaningful change there.

There has to first be a round of creative destruction, where weak zombie-companies are allowed to go to the wall, so that their place can be taken by stronger, leaner, and better managed companies. Until that happens, no amount of fiscal or monetary stimulus will make any real long term difference to Japan's problems. Of course, no government that wants to be re-elected, will allow such an unplesant shock to the system to happen, least of all in Japan where change is seen as undesirable at the best of times.

http://nipponmarketblog.wordpress.com/

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