Japan’s government on Tuesday approved its new long-term economic revival plan, which focuses on renewable energy, healthcare and farming, but economists were sceptical about whether it would really help Tokyo hit its growth targets.
Japan needs solid economic growth to have a fighting chance of reducing its public debt burden, which already exceeds two year’s worth of economic output and which economists say cannot be brought down by raising taxes or cutting spending alone.
The plan, an update of a growth strategy compiled in 2010, targets average annual nominal economic growth of 3 percent and real growth of 2 percent in a decade to the fiscal year of 2020, but economists warned it was betting too much on growth of domestic markets.
Instead, they said the strategy should put more emphasis on free trade deals as a way of unlocking growth in an economy beset by a decade of deflation, a strong currency and a shrinking workforce.
“Ideally, the development of trade agreements should be a pillar for the strategy,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute.
“(Otherwise) it will be difficult to achieve nominal 3 percent growth, considering a decline in working-age population.”
Following last year’s Fukushima nuclear disaster, the government ditched plans to boost the use of nuclear power in favour of green energy, with a goal of creating new 50 trillion yen ($640 billion) market and 1.4 million new jobs by 2020.
Economists, however, said replacing nuclear power with new energy sources would not do much to spur growth and the renewable sector would only make a significant contribution if Japan turned it into one of its export industries.
“It would help the economy if Japan could raise its competitiveness in the global renewable energy market … because the nation now lags behind,” said Yasuo Yamamoto, senior economist at Mizuho Research Institute.
Economists were equally sceptical about the contribution that health and nursing care services could make to Japan’s overall economic performance.
The strategy sees the sector nearly doubling in size by 2020, growing by 50 trillion yen and adding 2.8 million jobs.
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