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Economy

Revamped Abenomics still needs more horsepower

Prime Minister Shinzo Abe, second from left, offered new labor market proposals Wednesday.

TOKYO -- Japan's government is all too aware that ensuring sustainable economic growth is impossible without addressing the labor shortfalls of a graying, shrinking population. But Prime Minister Shinzo Abe's government has yet to produce radical labor market reforms, and the steps it now has proposed rest on shaky fiscal foundations.

The government plan offered Wednesday to promote economic inclusiveness aims to breathe new life into Abenomics, which is looking spent in its third year. Yet the contents seem wimpy compared with the size of the goals they are meant to achieve.

Japan faces an increasingly severe shortage of workers. The labor force has lost 1.7 million people in the past 15 years. The ratio of job openings to job seekers has climbed to 1.3, the highest in nearly a quarter century.

Abe's government estimates that steps such as narrowing the wage disadvantage of temps and other "non-regular" workers to European levels, along with measures to reduce long work hours and increase child care facilities, will produce increases of 1.17 million workers in fiscal 2020 and 2.04 million in fiscal 2025.

An increase in employed people is supposed to bring an increase in consumption. Consumer spending is seen rising by 13.7 trillion yen ($124 billion) in fiscal 2020 and 20.4 trillion yen in fiscal 2025. In between, Abe targets a gross domestic product of 600 trillion yen for fiscal 2021.

How such ambitious employment and consumption goals can be achieved is unclear. Companies need incentives to accept the higher labor costs that go with narrowing the pay gap between regular and non-regular workers. And the plan leaves out regulatory reforms that could steer people out of dead-end industries and into growing ones.

Anticipated growth in tax revenue is supposed to go toward higher pay for child care professionals and other measures to promote population growth and economic participation. But the profit declines that many companies forecast for their current fiscal year -- blamed on a strengthening yen -- leave in doubt the ability of tax receipts to keep rising steadily.

Though the government is sticking to a goal of running a primary surplus by fiscal 2020, it has shown little in the way of budget reforms that sting, such as diverting money from entitlements for the elderly to efforts to raise the birth rate. As the economic climate turns ugly, many question Tokyo's ability to meet its fiscal health targets.

(Nikkei)

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