Friday, Shinzo Abe promised the markets additional steps after Japan’s upper house elections next month as the monetary policy failed to impress the market this go around with yen making a healthy move upward. Currently, Abe’s plans include super-easy monetary policy coupled with large government expenditures which have been released in bits and piece to much of the market’s dismay.
However, Japan’s Prime Minister is proposing additional growth strategies that include economic zones, specific zone deregulation and integrating more women into the workforce. There has been disappointment over Abe’s proposals due to the lack of tax cuts in the corporate sector among other key factors. In regard to tax breaks, the Japan government will propose tax incentives for those companies that invest in new equipment and facilities.
Earlier today, Abe released a video message that indicated growth strategies decided will just be the starting point. “I will ensure political stability and in the autumn I will launch the second round of the Growth Strategy,” Abe commented. Will the market wait that long, and will it be enough? The Nikkei showed exactly what it thought of the current growth strategies with a monster retrace and technically sending itself into bearish territory.
Conversely, it seems as Japan’s push to work it’s way out of economic stagnation is working as GDP figures expanded an annualized 4.1 percent in the first quarter. The weaker yen gives relief to exporters and business confidence has also increased of late.
Abe’s party controls much of the lower house and lacks key positions in the upper house. Given the economic recovery, it is largely suggested that the PM’s party will also gain majority in the upper house come election time.
In combination to it’s growth plan, the Japanese government created fiscal targets of cutting it’s primary debt in half (excluding new bond sales and debt servicing) by March 2016 with a return to surplus in March 2021.