Japan creates new special economic zones to boost growth

Japan creates new special economic zones to boost growth

On April 1, 2014, Japan’s economy braces for a hefty sales tax increase (from 5 % to 8 %) that might impede consumption and economic development. In order to provide a counter weight and to keep a long term growth, Japan is creating new special economic zones

The revealed zone areas are vast and include Japan’s two biggest metro areas of Tokyo and Osaka. Two rural areas will be created for agricultural reforms, and the scenic island of Okinawa is to become a test site for implementing policies to attract tourists. All in all, theses designated areas generate about 40 % of the country’s GDP Gross Domestic Product.

Implementing special economic zones is not new, because also former Prime Minister Junichiro Koizumi tried to implement these, and failed. However there is a difference to the planned area a decade ago. At that time Kozumi planned hundreds of tiny disparate zones and they were missing the geographic scale for industries to cluster and expand. They only directed economic activity into zones from undesignated areas nearby.

Now the map is drawn up, however what can take place in these new areas is still a blank spot. Japan’s business community is opting for more flexibility in hiring and firing of workers, and sweeping deregulation of tightly controlled industries such as health care.

Policies for each of the new zones will be lined out by special committees, in a process to sideline government departments that have long resisted major reforms in Japan. Actual Premier Abe will alone have the power to approve proposals for the new zones. Detailed policies should hopefully prevail in summer, and just around the time Abe is to announce a second round of nationwide economic reforms.  The right forthcoming reforms in the zones could really significantly enhance the country economically.

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