The Bank of Korea: "Japanese Prime Minister Suga Focuses on Structural Reforms in Government, Corporations, and Households"

Japanese Prime Minister Yoshihide Suga
Photo by Yonhap News

[Asia Economy Reporter Eunbyeol Kim] Japanese Prime Minister Yoshihide Suga's economic policy maintains the Abenomics framework but is being pursued in a form that places greater emphasis on structural reforms, according to evaluations.

On the 15th, the Bank of Korea analyzed and assessed Prime Minister Suga's economic policy direction in its 'Overseas Economic Focus.' The Bank of Korea stated that Suga's economic policy "aims to achieve results in structural reforms (the third arrow), which were relatively insufficient under Abenomics, and focuses policy efforts on improving productivity in vulnerable sectors."

Former Prime Minister Abe has promoted Abenomics, represented by the 'three arrows' of quantitative easing, fiscal spending, and structural reforms, since his return to power. Among these, structural reforms are evaluated to have progressed more slowly than planned due to political opposition and other factors.

According to the Bank of Korea's analysis, Prime Minister Suga's main economic policies can be summarized as improving government efficiency, revitalizing corporate restructuring, increasing household income, and strengthening social security.

First, to improve inefficiencies in administrative services such as delays in disaster relief payments highlighted during the COVID-19 response, a Digital Agency will be established by next year, and information systems will be integrated to promote the digitization of administration as a key focus. Efforts to continuously ease inefficient administrative regulations are underway, and plans are being considered to expand the distribution of the My Number Card, useful for online identity verification, to the entire population by 2023.

Structural reforms will be promoted for small and medium-sized enterprises (SMEs) and regional banks with low competitiveness due to low productivity, and Japan's global supply chain will also be reorganized. For SMEs, productivity will be increased by easing merger and acquisition regulations to promote restructuring, and the integration of 102 regional banks will be encouraged. Considering the excessive dependence on China in the supply chain, production bases will be diversified, and reshoring efforts will continue.

To increase household income, measures such as reducing communication fees and raising the minimum wage are being pursued, and to raise the birth rate, support for infertility treatment and expansion of childcare facilities are also underway. The minimum wage is also being considered for a rapid increase from this year's average of 901 yen to around 1,000 yen.

The Bank of Korea stated, "Since taking office, Prime Minister Suga has focused on structural reform tasks, especially prioritizing administrative reform, which had a relatively small share in Abenomics."

However, it added, "Since Prime Minister Suga's term is until September next year, and considering opposition from stakeholders, it is unlikely that structural reform policies will achieve broad results in a short period." Accordingly, it is expected that Suga will focus on short-term achievable tasks such as launching the Digital Agency and reducing communication fees. Corporate restructuring tasks may be postponed until after the House of Representatives and Liberal Democratic Party presidential elections next year."

This content was produced with the assistance of AI translation services.