TPT September 2014

Global Marketplace

› As to implementation of the corporate tax cut, details of which were not immediately forthcoming, Naoki Iizuka, an economist at Citigroup Global Markets Japan, said Mr Abe’s plans needed to be bolder. “Abe’s ‘Third Arrow’ growth strategy seems to me like a dart,” Mr Iizuka told the BBC. “Not an arrow.” Automotive With Japan’s long-term future as an automotive powerhouse in the balance, fuel cell technology becomes a focus of attention It is not surprising that the Japanese auto industry figures prominently in Prime Minister Shinzo Abe’s growth strategy (See “Japan’s Corporate Tax,” above). The automotive sector accounts for nearly one in 11 of the nation’s jobs and about 20% of its manufacturing output. It also keeps Japan at the apex of global industrial competition. Mr Abe’s particular regard for car makers was on display on 24 June, with his call for subsidies and tax breaks for buyers of fuel cell vehicles, relaxed curbs on hydrogen fuel stations, and

below 30% in several stages starting in 2015. The move is the “third arrow” of Prime Minister Shinzo Abe’s plan to revive the Japanese economy, a pledge made when he took office in December 2012. As noted by the BBC (24 June), Mr Abe’s first two arrows were launched last year. Measures included working with the Bank of Japan on an aggressive monetary easing policy of monthly bond purchases that helped drive down the value of the yen against the US dollar. This benefited automakers, among other Japanese exporters. The central bank also set an inflation target of 2%, which it hopes to achieve in a few years’ time. Japan had been battling deflation, or falling prices, for nearly two decades, but the rising prices of recent months suggested that change may be in the works. The trend was abetted by a rise in the sales tax, from 5% to 8%, in April – the first such increase in 17 years. And the sales tax is set to rise further, to 10%, next year. Linda Yueh, the BBC’s chief business correspondent, said the planned changes were “crucial to getting growth going.” And, taken together, they seemed to meet with the approval of economists. But there were warnings against unrealistic expectations. “Various legislation must be enacted and it will take time for companies to begin to act,” said Kenji Yumoto, vice-chairman of the Japan Research Institute. “Therefore, it will be ten to 20 years before the potential growth rate rises.”

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