Tourism boom can't hide Japan's need for reforms
- By Cai Hong
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E-mail China Daily, November 24, 2015
The Japanese prime minister has been urging the country's corporations to give their employees wage rises and invest more, hoping to start the virtuous cycle that his economic agenda is supposed to engender. He envisions private sector-driven growth, in which higher corporate earnings boost people's wages and spending, thereby encouraging more business investments.
The October data highlight the underlying weakness of consumer spending and capital investment, which together account for more than 70 percent of Japan's GDP.
Corporate executives asked the government for less red tape and lower taxes.
By encouraging companies to invest, the Japanese government aims to lower the effective corporate tax rate from the current 32.11 percent to the 20 percent range over several years.
When unveiling the second round of his Abenomics in June, Abe sought to lift Japan's GDP by 20 percent to 600 trillion yen ($4.89 trillion) by 2020. But as Japan's financial daily The Nihon Keizai Shimbun points out, achieving this goal will require annual wage growth of 3 percent and more than 10 trillion yen a year in capital spending.
Japanese corporations were sitting on a record-high 354 trillion yen in retained earnings in 2014.
Japan is in recession for the fifth time in seven years, and the second time since Abe returned to office three years ago. Its economic growth has jilted into positive and negative territory.
And the weak yen, which represents one of the effects of inflationist policies, has turned once prohibitively expensive Japanese cities into affordable destinations for many middle-class Chinese tourists among others.
To accommodate the flood of foreign travelers, some love hotels in Tokyo have been converted into hostels.
Overseas tourists are offering a fresh boost to Japan's economy. But the success of Abe's plans ultimately relies on structural reform.
The author is China Daily's Tokyo bureau chief.
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