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Japan – Labour reforms delayed as Prime Minister faces resistance

18 October 2013

Japan’s government has delayed key labour market deregulation, as Prime Minister Shinzo Abe faces resistance to a core part of his growth strategy to revive the world’s third-biggest economy, reports Bloomberg.

This decision comes swiftly on the heels of the Prime Minister’s pledge this week to create a virtuous cycle of higher employment and spending.

Fixed-term employment contracts may be extended to 10 years from the previous five within special economic zones under proposed new regulations. Other changes, including lifting restrictions on working hours for white-collar workers, will not go ahead, according to the Nikkei newspaper.

Freeing up the labour market is crucial to the “third arrow” of Abe’s so-called Abenomics policies to shake up industry and lay a foundation for sustained growth. Relaxing employment rules in certain areas or for some companies would be “unacceptable,” the head of the Japanese Trade Union Confederation Nobuaki Koga said yesterday after a meeting with politicians and business leaders.

Business leaders had called for changes to labour regulations to ease hiring and firing in what is still partially a lifetime employment system in Japan. In August, it was reported that reducing the restraints on companies has become even more important to Shinzo Abe’s economic plans. His intention had been to loosen the rigid rules on job terminations for full-time staff.

Investors will lose confidence in Japan’s economic revival unless Abe adds substance to his growth strategy and relies less on stimulus measures, Hideo Hayakawa, who previously served as executive director at the Bank of Japan, said in an interview in Tokyo this week.

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