Abe's Cabinet OKs growth strategy, but it may fall short of hopes

Prime Minister Shinzo Abe's Cabinet on Friday endorsed its growth strategy, the last of the three arrows of "Abenomics," aiming to end nearly two decades of deflation by beefing up private-sector investment and rebuilding businesses.

Abe's government, formed on Dec. 26, also approved longer-term economic and fiscal policy blueprints in which it set a new goal of reducing the ratio of Japan's public debt to gross domestic product from fiscal 2021 in a stable manner.

But most of the policy proposals in the strategy do not break new ground and the blueprints gave no details on how to pave the way to sound public finances, failing to map out concrete steps to simultaneously attain economic growth and fiscal consolidation.

In the run-up to the House of Councillors election this summer, Abe may struggle to maintain the optimism that has surrounded his economic policies, centering on the growth strategy together with drastic monetary easing and large-scale public works projects.

In the strategy, the government set the target of augmenting the total amount of business investment by 10 percent during the next three years to bring it up to around 70 trillion yen, equivalent to the level seen before the 2008 global financial crisis.

It promised to boost Japan's per-capita gross national income by more than 1.5 million yen in 10 years.

The strategy also stipulated that Abe's administration will allow online sales of over-the-counter drugs in Japan, set up special economic zones in which deregulation can be promoted, and restart idled nuclear power plants.

The government, meanwhile, put off deciding to lower the corporate tax rate despite a request to do so by business leaders.

In the blueprints, it pledged to halve the ratio of the primary balance deficit to the country's GDP by fiscal 2015 from the level in fiscal 2010 and turn the balance into a surplus by fiscal 2020.

The latest estimates, however, suggest that achieving a primary budget surplus is almost infeasible as Japan's fiscal health has shown little sign of improving amid ballooning social security costs due to the aging of the population.

On the economic front, Abe's administration said it will target average nominal economic growth of 3 percent per year, or a real rate of 2 percent for the coming 10 years.