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| In Japan, a Growth Strategy With Echoes of the Past | In Japan, a Growth Strategy With Echoes of the Past |
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| TOKYO — DIGITAL medical records. Special economic zones. Structural reforms. | |
| The core ideas behind Prime Minister Shinzo Abe’s much-publicized growth strategy are stirring a nagging sense of déjà vu. | The core ideas behind Prime Minister Shinzo Abe’s much-publicized growth strategy are stirring a nagging sense of déjà vu. |
| They should. The plan, which is set to be approved later this week, borrows liberally from a string of previous government initiatives that similarly promised to bolster the economy, including his own. And economists and investors are increasingly worried that the latest initiative will have the same effect as the past ones — that is to say, little at all. | They should. The plan, which is set to be approved later this week, borrows liberally from a string of previous government initiatives that similarly promised to bolster the economy, including his own. And economists and investors are increasingly worried that the latest initiative will have the same effect as the past ones — that is to say, little at all. |
| “Every prime minister in recent memory has introduced an economic growth strategy, each not much better than the other,” said Akihiko Suzuki, chief economist at Mitsubishi UFJ Research and Consulting, the research arm of the large Japanese bank. | “Every prime minister in recent memory has introduced an economic growth strategy, each not much better than the other,” said Akihiko Suzuki, chief economist at Mitsubishi UFJ Research and Consulting, the research arm of the large Japanese bank. |
| “Expectations rise, but are quickly dashed,” Mr. Suzuki said. “It’s foolish to expect something different this time.” | “Expectations rise, but are quickly dashed,” Mr. Suzuki said. “It’s foolish to expect something different this time.” |
| The first two arrows of Mr. Abe’s economic push — a sizable dose of monetary and fiscal stimulus — initially impressed investors, sending the stock market soaring as much as 80 percent in six months. But some of that enthusiasm has evaporated, since Mr. Abe outlined the third piece, the core growth strategy. In recent weeks, the Nikkei has been in a steady slide. | The first two arrows of Mr. Abe’s economic push — a sizable dose of monetary and fiscal stimulus — initially impressed investors, sending the stock market soaring as much as 80 percent in six months. But some of that enthusiasm has evaporated, since Mr. Abe outlined the third piece, the core growth strategy. In recent weeks, the Nikkei has been in a steady slide. |
| Some investors worry that the prime minister’s plans are not much different than the largely ineffective attempts made by his predecessors, including Mr. Abe during his previous stint in 2006 and 2007. | Some investors worry that the prime minister’s plans are not much different than the largely ineffective attempts made by his predecessors, including Mr. Abe during his previous stint in 2006 and 2007. |
| Take Mr. Abe’s idea to help create a cutting-edge industry by digitizing Japan’s wealth of medical data, ripe for mining by technology companies. A similar policy was featured in Mr. Abe’s accelerated growth program, drawn up in mid-2007, during his previous term in office. | Take Mr. Abe’s idea to help create a cutting-edge industry by digitizing Japan’s wealth of medical data, ripe for mining by technology companies. A similar policy was featured in Mr. Abe’s accelerated growth program, drawn up in mid-2007, during his previous term in office. |
| But after Mr. Abe resigned in September 2007, doctors started to grumble over the burdens of digitization. Many clinics run by older physicians eventually won exemption from the plan, along with others who found it difficult to work with digital technology. It is unclear whether the digital push this time will be more comprehensive or how much new business it may generate. | But after Mr. Abe resigned in September 2007, doctors started to grumble over the burdens of digitization. Many clinics run by older physicians eventually won exemption from the plan, along with others who found it difficult to work with digital technology. It is unclear whether the digital push this time will be more comprehensive or how much new business it may generate. |
| Mr. Abe also wants to create special economic zones that would relax some aspects of nationwide regulation in an effort to woo foreign investors. In part, the prime minister is pushing for more flexible medical services to cater to expatriates and more leeway for companies in emerging fields to hire and fire staff members. | |
| Mr. Abe’s mentor, the former prime minister Junichiro Koizumi, tried much the same tack in the early 2000s. His reforms led to the creation of almost 1,000 special zones for structural reform, which relaxed things like the paperwork required by foreign researchers, standardized school curriculums, and licenses to home-brew sake, or Japanese rice wine. | Mr. Abe’s mentor, the former prime minister Junichiro Koizumi, tried much the same tack in the early 2000s. His reforms led to the creation of almost 1,000 special zones for structural reform, which relaxed things like the paperwork required by foreign researchers, standardized school curriculums, and licenses to home-brew sake, or Japanese rice wine. |
| The opposition Democratic Party introduced similar zones during its three-year stint in power, which ended in late 2012 with the victory of Mr. Abe’s Liberal Democratic Party. But the long-term impact of such efforts has been limited. | The opposition Democratic Party introduced similar zones during its three-year stint in power, which ended in late 2012 with the victory of Mr. Abe’s Liberal Democratic Party. But the long-term impact of such efforts has been limited. |
| Sweeping economic goals and strategies have become an almost annual rite for Japan’s successive prime ministers. | Sweeping economic goals and strategies have become an almost annual rite for Japan’s successive prime ministers. |
| Before Mr. Abe’s growth strategy came three policy initiatives from the Democratic Party: Yukio Hatoyama’s New Growth Strategy of 2010; Naoto Kan’s Scenario to Bring Back a Lively Japan of 2011; and Yoshihiko Noda’s Japan Revival Strategy of 2012. Those initiatives did little to brighten Japan’s economic prospects. | Before Mr. Abe’s growth strategy came three policy initiatives from the Democratic Party: Yukio Hatoyama’s New Growth Strategy of 2010; Naoto Kan’s Scenario to Bring Back a Lively Japan of 2011; and Yoshihiko Noda’s Japan Revival Strategy of 2012. Those initiatives did little to brighten Japan’s economic prospects. |
| Preceding those policies were Yasuo Fukuda’s Economic Growth Strategy of 2008 and Taro Aso’s Future Pioneering Strategy of 2009, which focused mainly on increasing gross domestic product. But the Japanese economy suffered its most severe recession amid the global financial crisis, ending the Liberal Democratic Party’s half-century of almost uninterrupted rule. | |
| Now, investors are worried that Mr. Abe’s growth strategy is merely more of the same, a situation that threatens to undermine confidence in the other facets of his program. | Now, investors are worried that Mr. Abe’s growth strategy is merely more of the same, a situation that threatens to undermine confidence in the other facets of his program. |
| “Until now, Mr. Abe had exceeded expectations. But just as we got to the most vital part of his program, he failed to produce anything substantive,” said Akio Makabe, a professor of economics at Shinshu University. | “Until now, Mr. Abe had exceeded expectations. But just as we got to the most vital part of his program, he failed to produce anything substantive,” said Akio Makabe, a professor of economics at Shinshu University. |
| Japan’s near-obsessive focus on growth plans traces its roots to the 1960s. At the time, Hayato Ikeda, then the prime minister, promised to double Japan’s income in that decade by lowering taxes and investing in infrastructure — a feat that would require 7.8 percent of growth a year. Japan’s economy exceeded expectations, increasing 10 percent a year. | |
| The success of Mr. Ikeda’s plan spurred more plans. His successor, Eisaku Sato, introduced three economic growth strategies from 1964 to 1972, but each one brought slower growth than the last. | The success of Mr. Ikeda’s plan spurred more plans. His successor, Eisaku Sato, introduced three economic growth strategies from 1964 to 1972, but each one brought slower growth than the last. |
| As Japan’s economy matured, and growth slowed further, focus shifted from growth to structural reforms that would correct some of the country’s economic distortions. The most fervent reformer in recent memory was Mr. Koizumi, who unleashed a platform of initiatives to increase competition in the Japanese economy. | As Japan’s economy matured, and growth slowed further, focus shifted from growth to structural reforms that would correct some of the country’s economic distortions. The most fervent reformer in recent memory was Mr. Koizumi, who unleashed a platform of initiatives to increase competition in the Japanese economy. |
| Even some of his most prominent policies have fallen by the wayside, highlighting how difficult it can be to make changes stick in Japan. | Even some of his most prominent policies have fallen by the wayside, highlighting how difficult it can be to make changes stick in Japan. |
| A law that allowed private companies to compete with Japan’s sprawling post office to deliver letters, for example, has been effectively neutralized with a provision that requires new competitors to set up at least 100,000 mailboxes across Japan and collect from all of those boxes at least six days a week. In the decade since that law went into effect, not a single company has taken up the challenge. | |
| A signature bid by Mr. Koizumi to privatize the post office’s vast financial arm, opening up the world’s biggest bank by deposits to competition, has also been quietly rolled back. The timetable for privatization is now delayed and the government is set to hold onto a higher proportion of Japan Post stock. Savers now enjoy a higher deposit insurance cap on their savings at the post office, encouraging them to keep more money parked there. | A signature bid by Mr. Koizumi to privatize the post office’s vast financial arm, opening up the world’s biggest bank by deposits to competition, has also been quietly rolled back. The timetable for privatization is now delayed and the government is set to hold onto a higher proportion of Japan Post stock. Savers now enjoy a higher deposit insurance cap on their savings at the post office, encouraging them to keep more money parked there. |
| Mr. Abe has tried to accentuate the differences between his reform efforts and Japan’s previous attempts at change. Mr. Abe has suggested the special economic zones might offer lower corporate tax rates. But he is likely to face difficulty bringing Japan’s 38 percent tax rate in line with Singapore or Hong Kong — whose corporate taxes are half that rate — without grumbling from businesses that do not qualify. | Mr. Abe has tried to accentuate the differences between his reform efforts and Japan’s previous attempts at change. Mr. Abe has suggested the special economic zones might offer lower corporate tax rates. But he is likely to face difficulty bringing Japan’s 38 percent tax rate in line with Singapore or Hong Kong — whose corporate taxes are half that rate — without grumbling from businesses that do not qualify. |
| There are already early signs of fault-finding. Lawmakers from Mr. Abe’s own Liberal Democratic Party have openly criticized a push to allow the sale of nonprescription drugs on the Internet — a move that would hurt brick-and-mortar pharmacists, a vocal interest group in Japan. With an eye on coming elections, the government is already moving toward keeping its Internet sales ban on more than two dozen of the best-selling drugs, including indigestion medicines and hair growth formula for men, a pharmaceutical cash cow. | There are already early signs of fault-finding. Lawmakers from Mr. Abe’s own Liberal Democratic Party have openly criticized a push to allow the sale of nonprescription drugs on the Internet — a move that would hurt brick-and-mortar pharmacists, a vocal interest group in Japan. With an eye on coming elections, the government is already moving toward keeping its Internet sales ban on more than two dozen of the best-selling drugs, including indigestion medicines and hair growth formula for men, a pharmaceutical cash cow. |
| “We have a problem if people start using twice the drugs they need, just because of the convenience” of buying medicine online, Norihisa Tamura, the health minister, said at a meeting of lawmakers last week. | “We have a problem if people start using twice the drugs they need, just because of the convenience” of buying medicine online, Norihisa Tamura, the health minister, said at a meeting of lawmakers last week. |
| Mr. Abe’s economic drive is coupled with a far more aggressive program of pump-priming, which economists say could make the difference. And some economists called for patience as Mr. Abe fleshed out his reforms ahead of parliamentary elections this summer. | Mr. Abe’s economic drive is coupled with a far more aggressive program of pump-priming, which economists say could make the difference. And some economists called for patience as Mr. Abe fleshed out his reforms ahead of parliamentary elections this summer. |
| “It is in the nature of prime ministers’ speeches that they don’t have enough detail to satisfy the policy wonks,” Nicholas Smith, Japan strategist at CLSA Asia-Pacific Markets, wrote in a note. “This seems like complaining that the waiter didn’t read you the whole recipe book.” | “It is in the nature of prime ministers’ speeches that they don’t have enough detail to satisfy the policy wonks,” Nicholas Smith, Japan strategist at CLSA Asia-Pacific Markets, wrote in a note. “This seems like complaining that the waiter didn’t read you the whole recipe book.” |