Japan Delays Labor Reforms as Abe Faces Resistance, Media Say

Japan’s government has put off key labor 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.

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

Freeing up the labor 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.

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.

Business leaders had called for changes to labor regulations to ease hiring and firing in what is still partially a lifetime employment system in Japan.

To contact the reporter on this story: Isabel Reynolds in Tokyo at ireynolds1@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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