Abe’s new Cabinet to take aim at labour, day care shortages

It’s essential to reinforce measures to boost the vitality of small and midsize companies, as well as to overcome the serious labour shortage. Akio Mimura, chair of Japan Chamber of Commerce and Industry

THE FOURTH Cabinet of Prime Minister Shinzo Abe is set to begin full-fledged work to compile a supplementary budget for fiscal 2017 and a budget for the next fiscal year.

The nation’s economy continues to recover on upbeat earnings reports by companies, but the labour shortage remains serious, and wages and prices are sluggish. It is an urgent task for the government to implement measures that will make it easier for companies to raise their productivity and secure workers while improving fiscal soundness.

Business leaders issued statements following the launch of the new Cabinet on Wednesday.

“I want (the Abe administration) to exercise strong leadership in implementing growth strategies and other measures,” said Sadayuki Sakakibara, chair of the Japan Business Federation (Keidanren).

Akio Mimura, chair of the Japan Chamber of Commerce and Industry, said, “It’s essential to reinforce measures to boost the vitality of small and midsize companies, as well as to overcome the seriouslabour shortage.”

The expansion of the economy, which started in December 2012, marked four years and 10 months in September, and is believed to be the second-longest period of growth since the end of World War II. The prime minister’s Abenomics economic policy package, which centres on massive monetary easing by the Bank of Japan, flexible fiscal stimulus measures and structural reforms, has produced positive results.

The Nikkei Stock Average has recovered to its highest levels in about 21 years after a series of listed companies announced positive half-year earnings that ended in September. The ratio of effective job openings to seekers in September was 1.52 higher than during the economic bubble. Companies have shown brisk business performance, and the employment situation is so strong that firms are facing alabour shortage.

However, wage growth has been slow, and consumption remains sluggish. Year-on-year consumer spending by households with two or more members fell 0.3 per cent in September - the first decline in two months. Companies have found it difficult to raise the prices of their products amid budget-minded sentiments among consumers. The inflation rate remains at the 0-per cent level, far from the two per cent target set by the Bank of Japan.

Abenomics aims to create a virtuous cycle in which the expansion of corporate profits will result in higher wages, consumer spending and prices. However, it remains halfway complete, mainly because many companies and individuals harbour concerns over their future and are holding on to cash. The Bank of Japan’s aggressive monetary easing appears to be approaching its limits. The central bank has purchased a large amount of government bonds to keep long-term interest rates low, but the total amount of such bonds available on the market has plunged.

The ageing society and shrinking population will impede the economy. It is essential for the government to take measures to accelerate economic growth.

“We will carry out even more powerful economic policies,” Abe said at a press conference on Wednesday. The prime minister also expressed his intention to promote a “revolution in human resources” with the aim of increasing the workforce while seeking to enhance individuals’ abilities, as well as a “productivity revolution,” which aims to increase corporate profitability.

If the workforce expands, thelabour shortage can be resolved. If companies create goods and services effectively, they can raise wages more easily. If consumer price increases pick up speed alongside more consumption, the nation will be able to overcome deflation, which has plagued the economy.

“These policies won’t produce immediate results, so they should be put into action as soon as possible,” said Kenji Yumoto, a vice chairman of the Japan Research Institute.

At the moment, the two touchstones of the new Cabinet are the fiscal 2017 supplementary budget and the fiscal 2018 budget. To continue work on achieving a revolution in human resources, the government plans to include, in the supplementary budget, funding to expand the capacity of day care centres by moving forward the schedule for measures to reduce the number of children on waiting lists to enter such facilities. By doing so, the number of women who attempt to return to work is highly likely to rise.

To achieve the productivity revolution, the government is expected to include measures to support investment in information technology for small and midsize companies hit by a serious labour shortfall.

Regarding the fiscal 2018 budget, curbing social security spending, which has soared due to the aging population and is currently estimated to account for about one-third of the entire budget, is key to restoring the nation’s fiscal health.

The government will be tested as to whether it can bring the growth in social security spending, which is expected to total about 630 billion yen for fiscal 2018, closer to its target of about 500 billion yen. — WPBloomberg