Some voters apparently saw it as an either or with the economy and it's longstanding problems as the more important of the two, revive economic growth or revise the nation's post-war pacifist constitution. The Nikkei jumped 3.6 percent to 15,654.82 points by mid-morning trade, the highest since July 5. The MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS jumped 1.9 percent to a one-month top. Australia added 1.8 percent and Shanghai .SSEC 1 percent.
Some of the god news came after U.S. equities on Friday on the nonfarm payroll jobs report that reveled the nation has added 287,000 jobs in June, a report that surprised, exceeding most economists' projections, n the coat tail of May's surprisingly weak report. Both reports were explained by a word economists used often when they have no real explanation for the numbers, aberrations. The S&P 500 index Friday brushed against its all-time high mostly on the jobs news.
Abe might be smiling for now, but here's a story from the WSJ that noted the structural problems his nation faces, not the least of which is guaranteed employment.
Prime Minister Shinzo Abe’s Liberal Democratic Party and its Komeito allies won a stronger majority in Japan’s Upper House election on Sunday. The victory was more a reflection of weak opposition, but perhaps he’ll use this third national victory in a row to salvage Abenomics.
Instead of the economic reforms he promised, Mr. Abe continues to push the same government spending and monetary loosening Japan has tried since the 1990s. The economy continues to dip into and out of recession, and deflation has returned since March with consumer prices falling 0.4% year on year in May. The election gives Mr. Abe another chance to arrest Japan’s economic slide, whether or not he deserves it, and his best bet is to tackle the labor market.
In 2014 Mr. Abe seemed poised to amend laws that make it difficult for companies to lay off full-time employees. But he backed off amid opposition from labor unions. Instead the Prime Minister focused on reinterpreting Japan’s constitution to allow closer military cooperation with the U.S. That was a worthy initiative, but it was so unpopular that Mr. Abe has lacked the political capital to pass economic reforms.
It’s time to try again. Japan’s labor laws allow even clearly incompetent employees to file wrongful dismissal cases that drag on for years. The Nikkei newspaper cites an estimate that six million full-time workers have nothing to do.
Japan’s lifetime-employment system worked tolerably well during the high-growth postwar years. But as the economy slowed and the population aged, companies shifted their hiring to part-time employees who can be laid off easily. That has created a two-tier system that hurts the young in particular.
The rise of part-time contracts explains why Japan’s low 3.2% unemployment rate hasn’t led to wage increases. Instead of laying off workers, companies reduce the number of hours they employ part-timers. Japan suffers from massive underemployment rather than unemployment.
The government also uses regulation to shelter nonmanufacturing industries from competition. This explains why Japan’s labor-productivity growth has remained below 2% for the past two decades, according to McKinsey. The problem is acute in services, where Japan’s productivity is about half that of the U.S.
University of Tokyo economist Hiroaki Miyamoto suggests Mr. Abe should also target Japan’s seniority-based wage system. Performance-based pay would give workers more flexibility to change jobs or leave to start new companies. Companies should be free to raise their retirement age and keep experienced workers in different capacities.
Resistance to labor reform from the opposition Democratic Party and even within Mr. Abe’s coalition will be intense. But the voters have given him his third successive mandate. This may be his last chance to use an election victory to push through the most critical reform for rejuvenating Japan’s economy.
Abe might be smiling for now, but here's a story from the WSJ that noted the structural problems his nation faces, not the least of which is guaranteed employment.
Prime Minister Shinzo Abe’s Liberal Democratic Party and its Komeito allies won a stronger majority in Japan’s Upper House election on Sunday. The victory was more a reflection of weak opposition, but perhaps he’ll use this third national victory in a row to salvage Abenomics.
Instead of the economic reforms he promised, Mr. Abe continues to push the same government spending and monetary loosening Japan has tried since the 1990s. The economy continues to dip into and out of recession, and deflation has returned since March with consumer prices falling 0.4% year on year in May. The election gives Mr. Abe another chance to arrest Japan’s economic slide, whether or not he deserves it, and his best bet is to tackle the labor market.
In 2014 Mr. Abe seemed poised to amend laws that make it difficult for companies to lay off full-time employees. But he backed off amid opposition from labor unions. Instead the Prime Minister focused on reinterpreting Japan’s constitution to allow closer military cooperation with the U.S. That was a worthy initiative, but it was so unpopular that Mr. Abe has lacked the political capital to pass economic reforms.
It’s time to try again. Japan’s labor laws allow even clearly incompetent employees to file wrongful dismissal cases that drag on for years. The Nikkei newspaper cites an estimate that six million full-time workers have nothing to do.
Japan’s lifetime-employment system worked tolerably well during the high-growth postwar years. But as the economy slowed and the population aged, companies shifted their hiring to part-time employees who can be laid off easily. That has created a two-tier system that hurts the young in particular.
The rise of part-time contracts explains why Japan’s low 3.2% unemployment rate hasn’t led to wage increases. Instead of laying off workers, companies reduce the number of hours they employ part-timers. Japan suffers from massive underemployment rather than unemployment.
The government also uses regulation to shelter nonmanufacturing industries from competition. This explains why Japan’s labor-productivity growth has remained below 2% for the past two decades, according to McKinsey. The problem is acute in services, where Japan’s productivity is about half that of the U.S.
University of Tokyo economist Hiroaki Miyamoto suggests Mr. Abe should also target Japan’s seniority-based wage system. Performance-based pay would give workers more flexibility to change jobs or leave to start new companies. Companies should be free to raise their retirement age and keep experienced workers in different capacities.
Resistance to labor reform from the opposition Democratic Party and even within Mr. Abe’s coalition will be intense. But the voters have given him his third successive mandate. This may be his last chance to use an election victory to push through the most critical reform for rejuvenating Japan’s economy.
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