Japan Economy Minister Says Abenomics Fell Short at Spreading Wealth

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(Bloomberg) -- Japan’s economic strategy in recent years has fallen short at passing on rising corporate profits to workers and the nation’s new administration is determined to tackle those shortcomings, according to Economy Minister Daishiro Yamagiwa.

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Abenomics, named after former premier Shinzo Abe, helped the economy grow in size from 2013, but its trickle-down approach of getting companies to share the benefits of growth was insufficient, Yamagiwa said in a group interview Thursday.

New Prime Minister Fumio Kishida will review the current tax benefits for companies that raise wages given that they have failed to gain traction, Yamagiwa said.

“We do recognize there were insufficient parts to Abenomics,” said Yamagiwa. “There are limits to a trickle-down approach, and some things need to be done bottom up.”

Read more: Japan Dissolves Parliament as Kishida Faces Oct. 31 Election

Yamagiwa’s remarks come as Kishida tries to rebrand the ruling party ahead of a national election at the end of this month. While Kishida is expected to lead the Liberal Democratic Party to victory, he faces a tough task to repeat the ruling coalition’s two-thirds majority win in 2017. By identifying some of the failings of Abenomics and distancing himself from the government of Yoshihide Suga, Kishida hopes to shore up support for the LDP. Suga stepped down as prime minister amid public discontent over his handling of the pandemic.

In another sign of the new premier’s willingness to change corporate behavior, Yamagiwa said a possible overhaul of corporate quarterly disclosure will be discussed at a new panel to be set up soon. The panel will aim to foster a new type of capitalism, a hallmark of Kishida’s economic strategy as he heads into the national election.

“It’s said that the quarterly disclosure of earnings is prompting shareholders to focus on very short-term profits,” Yamagiwa said. “The prime minister feels that this needs to change.”

Yamagiwa maintained the previous administration’s stance of fiscal consolidation and monetary policy saying there’s no need to change a 2013 joint policy accord between the government and the Bank of Japan that commits the central bank to achieve 2% inflation, as well as the government’s goal to balance its primary budget by fiscal 2025.

(Updates with more comments from Yamagiwa)

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