Tokyo: Japan, battling to revive its economy, on Friday pledged to create five million jobs through a 10-year growth strategy centred on green technology, health care, tourism and closer links with Asia.
The centre-left government of Prime Minister Naoto Kan, who took office last week, has pledged to end two decades of stagnation in Asia’s biggest economy and achieve stable real economic growth above 2.0% a year.
In the short term, the government aims to beat deflation by late fiscal 2011 and boost weak demand while bringing unemployment down from about five percent now to below 4% soon and then down to 3%.
Japan is also eyeing lowering the corporate tax rate, from an effective 40% now to the average level of major industrialised nations, which is around 25%, possibly from fiscal 2011, the strategy paper says.
Kan, a former left-wing activist who most recently served as finance minister, has promised a “third way” approach for the economy, which is expected to slip behind China soon to global number three spot.
The premier has identified the “first way” as the heavy infrastructure spending of the 1980s and 90s, much of it pork-barrel projects that drove up public debt and left many “white elephant” projects of dubious economic value.
Kan has also rejected as the “second way” the “excessive market fundamentalism” of former premier Junichiro Koizumi which aimed to slim down government but also weakened social safety and widened income disparities.
In a speech last week, Kan outlined his “third way” policies — an ambitious approach that would strengthen domestic demand and jobs while also boosting the social security system and reducing the public fiscal deficit.
Kan has pledged to reduce the world’s biggest public debt mountain, which is nearing 200% of GDP, and has warned of the risk of a Greece-style meltdown for Japan if the problem is left unaddressed.
He has said the DPJ would call for a full debate on tax reform and did not rule out the possibility of doubling the 5% sales tax.
His party, in an election manifesto released Thursday, pledged to slice the country’s public deficit in half or less by the year to March 2016, with a longer term ambition of eliminating it by fiscal 2020.
Japan — with an ageing and shrinking population — already collects less than half the taxes it needs to cover its spending.
In order to revitalise the economy, the government wants to focus on core areas, including “green innovation”, which it estimates will create 1.5 million jobs, and health care, which would generate 2.8 million jobs.
More growth would come through strengthening ties with booming Asia, which is already the key market for Japanese exports, and selling technology from renewable energy innovations to Shinkansen bullet trains abroad.
Growing tourism from less than 10 million annual visitors now to 25 million by 2020 — in part by easing visa regulations for Chinese and by increasing ‘medical tourism — is expected to boost Japan and many of its regions, creating more than half a million jobs, according to the strategy.
Kan, riding high in opinion polls ahead of 11 July upper house elections, seems to have public support for his approach, said Thomas Berger, associate professor of International Relations at Boston University.
“Faced with a budget deficit of epic proportions, the new prime minister has made putting Japan’s fiscal house in order his number one priority,” he said.
“Encouragingly, public opinion data suggests that the Japanese public is prepared to contemplate tax increases and budget cuts if it can reduce the risk of a Greek-style economic meltdown.”
“Public opinion data also suggests the Japanese public believes Japan has the latent economic and technological resources to pull off a comeback.”