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Japan's Quest to Pilot Reforms through Special Economic Zones

JP Gauthier

The Economist has published a string of articles this year on Japanese Prime Minister Shinzo Abe's efforts to use special economic zones, or tokku, to pilot massive structural reforms to the Japanese economy and society.  Like many other leaders, he views SEZs as a way of initiating reforms that are not politically possible at a national level.  Some of the reforms Abe would like to initiate in the zones are quite interesting and could have profound impacts on Japan if implemented.

In the tokku, taxes would be lower, immigration would be more open, and building regulations would be relaxed.  Japanese robotics companies would benefit from greater freedoms, such as the ability to introduce driverless cars and robots that interact more in society.

Perhaps the most important attempted reform, and the reform that faces the strongest opposition, is that in the tokku, businesses could hire and fire workers––something almost impossible in Japan today.   Abe believes this reform will increase hiring, though the opposition fears that inequality will result.  

Significantly, the proposed zones are huge in size––including Tokyo and other big metropolises.  Reforms enacted there would affect a quarter of the Japanese workforce.

Read the most recent full article and post your thoughts below.

Japan Macro Advisors believes that opponents will make implementation difficult, which will greatly water down the strength of the reforms.