Plan includes bold measures like regulatory reforms and boosting foreign investments

With a growth strategy--”the third arrow” of Abenomics--announced Wednesday, the full picture of Prime Minister Shinzo Abe’s economic policies has been unveiled.

In the growth strategy, the Abe administration has set goals including a target to boost the per capita gross national income by 3 per cent a year.

To realise the goals, it plans to take bold measures such as regulatory reforms and boosting foreign investment in Japan. The administration also intends to clarify its stance on financial restructuring in a basic fiscal policy, which would lay out midterm steps.

By doing so, his government apparently aims to dispel growing worries over the impact of Abenomics on the stock market.

Abenomics consists of three arrows. The first is aggressive monetary easing by the Bank of Japan, while the second is related to flexible and timely fiscal spending. With these two arrows already released, attention has turned to the third arrow--the growth strategy.

Specific steps to spur economic growth have been discussed by the government’s Industrial Competitiveness Council. Meanwhile, the Regulatory Reform Council reported to Abe on Wednesday morning support measures for the growth strategy, such as an overhaul of labour regulations.

Reforms hold key

To offset the potential side effects of bold fiscal spending and monetary easing, the Economic and Fiscal Policy Council is discussing midterm measures to rebuild public finances, which are viewed as a “fourth arrow” of Abenomics. The panel is expected to submit a basic fiscal policy draft to the government Thursday.

Labour-related measures proposed by the regulatory reform panel chaired by Sumitomo Corp. Adviser Motoyuki Oka call for a drastic review by autumn of the dispatch worker system, which currently sets different contract terms depending on the type of job.

Specifically, the panel is urging the government to consider scrapping an exception for 26 types of jobs that do not have regulations on the number of years a worker can be dispatched. This would allow companies to receive dispatched workers for all types of jobs for more than three years.

With the exception of 26 types of professional jobs including machine design, secretarial work and financial affairs work, companies are currently permitted to keep dispatched workers for a maximum of three years.

As the current system has been criticised as being ambiguous, the panel is examining the idea of extending the dispatch period to about five years regardless of the type of job.

The panel also proposed that the government work out new labour rules by fiscal 2014 to increase the number of so-called limited regular employees, whose duties, locations and working hours are limited. However, they are entitled to welfare benefit programmes and are not subject to a set period of employment like full-fledged regular employees.

Special zone for overseas funds

Also part of the growth strategy, the government is taking steps to establish a special financial zone in Tokyo that is designed to tap investments from abroad. The steps feature significant tax cuts for international financial transactions via Japan. The Financial Services Agency and the Finance Ministry plan to set up a task force soon and draw up specific plans this year.

For companies of other Asian countries that establish financial affiliates in the special zone, the government is considering making interest and dividends that affiliates receive from group firms in and outside Japan tax-free.

The government also envisages reducing corporate taxes on profits that financial institutions based in the special zone obtain from financial transactions in Asia.

In addition to such tax incentives, the government plans to discuss simplifying paperwork needed for companies to issue corporate bonds.

According to a survey by the British think tank Z/Yen Group, London ranked as the most competitive financial center in the world, followed by New York. Tokyo ranked sixth, lagging Asian rivals that are keen to attract foreign investors--Hong Kong and Singapore, which were ranked third and fourth, respectively.