Monday, June 22, 2015

Japan shifts focus of "Abenomics" to boosting capex

Japan shifts focus of "Abenomics" to boosting capex


[TOKYO] Japanese Prime Minister Shinzo Abe said on Monday he plans to hold a formal dialogue with the business sector on ways to boost investment, signalling a shift in the focus of his growth strategy towards capital expenditure.
The government unveiled an outline of its strategy to boost Japan's growth potential, highlighting the need to increase investment on artificial intelligence and robots to help offset the impact of a rapidly ageing society on the labour market. "Discussions with the business sector on raising wages and prices have yielded some results," Mr Abe told a meeting of a government panel debating the growth strategy. "In addition to this, I would like to propose creating a venue for dialogue between the government and the private sector on measures to nurture investment for the future," he said.
Mr Abe did not specify when he will hold the dialogue, but the Nikkei business daily reported that it will take place this autumn, and would be attended by Mr Abe, key economic ministers and the heads of business lobbies.
Boosting wages and capital expenditure are key to the success of Mr Abe's strategy to boost growth and conclusively lift the economy out of a long, debilitating phase of deflation by encouraging companies and households to spend more now rather than save.

The strategy, dubbed "Abenomics," consists of a "first arrow" of aggressive monetary easing, a "second arrow" of flexible fiscal policy and a "third arrow" of measures to boost Japan's long-term economic growth.
Mr Abe met business executives last year to pressure them to boost wages and succeeded in persuading many companies to raise salaries for the first time in years.
Now, the premier has his eyes set on increasing capital expenditure, which is showing signs of life after years of stagnation.
The need to increase investment on cutting-edge information technology has become increasingly urgent.
Heavy doses of monetary and fiscal support have revived demand in the economy, while also exposing supply constraints, such as labour shortages and low productivity, that could hamper long-term growth. "As the working-age population can't be expected to increase much for the time being, Japan will face limits to growth unless it boosts productivity," the growth strategy paper said. "In order to heighten productivity, it's crucial to invest more."
REUTERS

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