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Prime Minister Shinzo Abe's victory in Sunday's election solidifies his control over the Japanese government and gives him a freer hand to carry out economic reforms. Japan's business leaders have a wish list for him.
Executives would like Abe to use his newfound power to cut corporate taxes, ease regulations, loosen labour laws and join an international free-trade agreement, calling such steps the most promising way to build on efforts to get the world's third- largest economy growing again after two decades of stagnation.
"We need to be on an equal footing with competitors overseas," Norio Sasaki, vice board chairman at Toshiba Corp, said at a gathering of industry leaders last week in Karuizawa, northwest of Tokyo. "The government needs to take steps to remove customs barriers, such as through the Trans Pacific Partnership agreement, and reduce corporate taxes."
The Japanese yen and stocks both rose after the Liberal Democratic Party election victory, which gives it an outright parliamentary majority and bequeaths Abe the clout to push through economic reforms and deregulation. The LDP and partner New Komeito gained at least 74 of the 121 seats up for grabs in the 242-seat Upper House. The coalition now controls both legislative chambers, called the Diet, for the first time since 2007 and need not face another election for three years.
Renaissance in growth
"The new government should seize the opportunity to drive a renaissance in Japan's growth," Shinichiro Ito, Chief Executive Officer of airline ANA Holdings Inc, said in an emailed statement. "I hope they will move forward speedily."
Japan's currency strengthened 0.6 per cent to 100.01 yen versus the dollar as of 5:07 pm in Tokyo. The Nikkei 225 Stock Average closed 0.5 per cent higher.
"I welcome the end of a split Diet," Toshifumi Suzuki, Chairman of retailer Seven & I Holdings Co, said in a faxed statement. "I look forward to seeing how the third arrow of Abenomics growth strategy is put into action with this decision- making power."
Among the burdens reducing the incentive for Japanese companies to invest at home is the second-highest level of effective corporate taxes in the Group of Seven nations, executives say. The nation's 35.6 per cent corporate tax rate compares with 25 per cent in China and 17 per cent in Singapore, according to the Ministry of Finance. Only the US has a higher rate at 39.1 per cent, according to Organisation for Economic Cooperation and Development data.
Corporate tax
"We want corporate taxes in line with other nations," Hiroshi Tomono, chairman of the Japan Iron and Steel Federation and president of Nippon Steel & Sumitomo Metal Corp, said in Karuizawa.
Abe said this month he wants to discuss cutting the corporate tax rate, without giving details before the election.
Toshiba's Sasaki said Abe should consider lowering the rate to as low as 20 per cent.
"The Japanese government should place priority on reforming taxes," Takashi Kawamura, chairman of Hitachi Ltd, Japan's second-largest manufacturing company, said in Karuizawa.
Lower corporate rates may draw criticism from voters, who are facing a higher tax burden as Japan plans to increase the national consumption tax in April, for the first time in 17 years, to eight per cent from five per cent.
Tax incentives
Abe said July 4 it's necessary to increase the consumption tax because of rising social-security costs and the nation's debt burden. At the same time, raising the tax risks choking off an economic recovery by damping consumption. The prime minister has said he'll consider economic conditions when making a final decision.
