SMOOTH TALKER

Shinzo Abe’s “third arrow” fails to impress investors who wanted a bigger boost

Japan’s prime minister took the stage on Wednesday to announce the third pillar of his “Abenomics” suite of policies, designed to shake the country out of its decade-long economic slump . It didn’t go very well. The Nikkei rose more than 1% as he started speaking, then within minutes reversed its gain, and then it kept falling, eventually closing down 3.8%.

It’s not that Abe’s plans were bad—they were just boring. Mizuho Trust & Banking analyst Takahiro Nakano told Bloomberg that “shares are being sold because Abe’s plan didn’t have any surprises that meet overblown expectations in the market.”

One key plank in Abe’s speech was a pledge to increase by half the amount of investment in Japan’s electricity industry, to about ¥30 trillion ($300 billion) over the next ten years. Renewable sources of energy and high-tech coal power plants will receive particular emphasis, although most noticeable was what Abe did not say—there was no mention of when the nuclear reactors that once accounted for over a quarter of Japan’s electricity generation would be restarted. That, combined with yet another report of contaminated water from the disaster-stricken Fukushima Dai-Ichi nuclear power plant sent shares in its operator, Tokyo Electric Power, plummeting 16%.

Other new policies included the following.

  • Cutting corporate tax to encourage investment in research and development.
  • Making it easier for larger businesses to merge and consolidate, to improve the international competitiveness of Japanese companies.
  • Seeking to put 70% of Japan’s external trade within free trade agreements by 2018.
  • Quadrupling the number of companies with agricultural operations by 2020.
  • Boosting inbound foreign direct investment.
  • Getting more women into work and encouraging companies to move people around more often.
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