Davos speakers say Abenomics strategies could misfire
Updated: 2014-01-24 06:00
DAVOS, Switzerland - Top Davos forum speakers said Thursday that while Abenomics seems to involve the right decisions to build-up Japan's economy, there are strategies that could misfire.
Japanese Prime Minister Shinzo Abe delivered an address yesterday in which he said he would act like a "drill bit," cutting through red tape and breaking down obstacles to growth.
"While Japan seems to generally be making the right decisions, there are strategies that could misfire," Joseph E. Stieglitz, professor at Columbia University said in a discussion.
He noted Japan planned to raise consumption tax and lower corporate income tax in April, "and pray that the good corporations will use the extra revenue to give wage increases."
"I know that in the United States that almost certainly wouldn't happen, and it may not in Japan either," Stieglitz said.
Clayton Christensen, professor of business administration at Harvard, said the reason Japan was growing robustly in the 1950s, 60s and 70s was that companies like Toyota, Honda, Sony and Canon made once-expensive products affordable and accessible to millions of consumers around the world.
"How can Japanese businesses produce innovations like those companies, instead of just increasing efficiency or improving current products," he wondered, adding, "Where has the entrepreneurship gone?"
Abenomics consists of three "arrows": aggressive monetary easing, fiscal stimulus and structural reforms. The first two arrows have already been deployed, though many observers have doubts that the third one might happen.