Reform Proposals Still Leave A Lot To Be Desired
BMI View: A successful implementation of Prime Minister Shinzo Abe's economic reform agenda would provide a major boost to Japan's economy and fiscal situation, but the lack of details surrounding certain key policies is a concern. Meanwhile, we view such reforms as a necessary but not sufficient for avoiding a fiscal crisis, with spending cuts likely to be crucial in reining in the deficit.
Prime Minister Shinzo Abe has unveiled his latest initiatives as part of his 'third arrow' of economic reforms, including cutting the corporate income tax and reforming the giant Government Pension Investment Fund (GPIF) to make it more equity focussed. While we believe that these reforms will be necessary in allowing the Japanese economy to avoid a fiscal crisis as a result of its huge debt load, they may not be sufficient. Furthermore, Abe may struggle to garner the political support to push through some of the more controversial elements of his plan.
GPIF Reform Will Be No Free Lunch
|No Fiscal Surpluses In Sight|
|Japan - Government Deficit, % Of GDP|