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  • 16/12/2016
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Japan's stimulus light on labor market reform

TOKYO -- While the stimulus package approved Tuesday by Japan's cabinet features a new perspective on much-needed structural reform, it leaves long-standing priorities of the business community unaddressed.

Japan's stimulus light on labor market reform

Neglecting productivity

The package calls workplace reform the biggest challenge on the structural reform agenda. It puts particular emphasis on improving the lot of workers without secure full-time positions, including ensuring equal pay for equal work and raising the minimum wage. Other reforms aim to boost female labor force participation, such as reducing excessive work hours and encouraging telecommuting.

But few solutions are offered for improving productivity, which sits at just 60% of levels in the U.S. and Europe. Legislation to allow compensation based on performance rather than time worked has been shelved by the Diet for two straight years. Discussion of letting courts award monetary compensation for wrongful dismissal has stalled in the labor ministry.

The job market continues to favor workers, with the nationwide ratio of job openings to applicants clocking in above 1 in every prefecture in June. Now would be an ideal time to implement painful but necessary reforms. Japan needs a labor market where workers can readily switch jobs in response to changing times, the Japan Association of Corporate Executives, or Keizai Doyukai, wrote Monday.

Thinking too long term

Whether plans for "21st-century infrastructure" will provide an immediate boost to the economy is unclear. The government will offer financing through the Fiscal Investment and Loan Program to Central Japan Railway for the Linear Chuo Shinkansen magnetic-levitation train, aiming to get it up and running ahead of schedule. But the portion in question is the Nagoya-Osaka leg, which is not scheduled to start operating until 2045. Given that environmental assessments for the project are still underway, construction is unlikely to start anytime soon.

Other measures include building port facilities for cruise ships and upgrading Haneda Airport to help achieve the government's target of 40 million foreign visitors a year. But the program does not touch on the contentious issue of lifting the ban on renting out private residences. Yet traditional public works projects, such as development in less-favored areas, made the cut.

Another focus is increasing agricultural exports to capitalize on the Trans-Pacific Partnership trade agreement. This plan centers on building export facilities rather than measures actually sought by the areas in question, such as looser restrictions on radiation levels. The package also does nothing to encourage new entrants into the industry.

Pre-emptive support

The stimulus includes assistance for small and midsize businesses to ease the blow from the British vote to leave the European Union, even though no widespread cash flow problems have emerged yet. The government-affiliated Japan Finance Corp. will offer low-interest loans, among other measures.

Fourth Industrial Revolution

The stimulus package promises support for new businesses using such innovations as artificial intelligence, robots and the "internet of things." The industry ministry will set up a joint public-private AI research facility in Kashiwa, Chiba Prefecture, as early as the end of fiscal 2017. The aim is to apply AI technology, an area where the U.S. is ahead, to manufacturing, a Japanese specialty.

But Japan's sharing economy -- a term encompassing such fast-growing services as ride-sharing and room rentals -- is underdeveloped compared with those of Europe and the U.S. Though the government has declared its intention to cut red tape, these efforts have met with resistance from traditional industries. Some worry that this could hinder development of new services and technological innovations to meet market needs, preventing new industries from thriving.

Another issue is nurturing talent that can take advantage of cutting-edge technologies. The government's growth strategies call for coding to be taught in elementary schools. More extensive measures, such as stepping up computer science education at the university level, are needed to adapt to changing times.


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