Abe Names Special Strategic Zones in Bid to Boost Japan’s Allure

Japan announced the locations of special strategic zones in which looser regulations will be tested as part of Prime Minister Shinzo Abe’s drive to attract investment and boost the nation’s competitiveness.

Abe today named the capital region around Tokyo as a zone for international business and the Kansai area surrounding Osaka as one for medical innovation. Niigata in northern Japan and Yabu in central Japan were designated as agricultural zones. Fukuoka was made a special labor zone, and Okinawa will become a zone for international tourism.

The announcement is the first concrete sign in recent months that Abe is moving ahead with his growth strategy. With a sales-tax increase on April 1 set to trigger a one-quarter contraction, progress on the so-called third arrow of Abenomics may help sustain momentum in a recovery that so far has mostly been driven by unprecedented monetary easing.

“We have readied the drilling structure to smash rock-hard regulations,” Abe said at the meeting where he announced the zones. Abe said he will speed this process up, and over the next two years make a breach in all the rock-hard regulations.

Details of the zones have yet to be fleshed out, with detailed plans to come as soon as the summer, Abe said today. The next stage is for the Cabinet to formally approve the cities and regions, which may come in late April, Internal Affairs Minister Yoshitaka Shindo said today.

“I hope the zones succeed in blasting holes in vested interests,” said Masamichi Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo. “They are significant from the perspective of increasing direct investment to Japan and offering an opportunity for Japanese companies to be more innovative.”

Zone Proposals

The designated cities and regions were selected from a range of proposals submitted to the government last year.

The plan from Fukuoka City, the largest city on the southern island of Kyushu, included revising visa requirements for foreign workers and labor conditions at startup companies.

Yabu City, which has a population of about 30,000, proposed measures to return abandoned farmland to use, and promote development of value-added foodstuffs. Niigata City’s plan included promoting farmland amalgamation and also greater involvement of companies in farming.

Greater Tokyo aims to become the easiest international city in the world to do business, and the plan included loosened building regulations and revised labor conditions for global companies. The Kansai area plan included promoting medical and health-care innovation including regenerative medicine, and also revised labor conditions for venture capital and global companies.

Enticing Cities

“Central-city property prices will likely rise when various plans are announced,” Tatsuo Hatta, a member of a government council on special economic zones, said in a January interview. The changes will create opportunities to improve urban planning and make cities more enticing for employees of foreign companies, he said.

Okinawa prefecture proposed becoming a hub for international tourism with loosened visa requirements, and also allowing scuba-divers to take diving tests in languages other than Japanese. This approval “reflects the government’s strong feelings about Okinawa,” Hatta said to reporters today after the meeting.

“Designated areas, on my own watch, will cut through red tape. There, over the next two years, no vested interests will remain immune from my drill,” Abe said in a January speech in Davos. “In cities hoping to join the world-class, limits on floor area ratios will become a thing of the past. The sky will be the limit.”

World-Class Cities

China last year inaugurated a free-trade zone in an 11-square-mile area of Shanghai as a testing ground for free-market policies. The pilot includes trials of yuan convertibility in capital flows and the establishment of an international energy center.

Other examples in Asia include South Korea’s eight economic zones, and Malaysia’s southern Iskandar region. Russian officials are considering the creation of a special economic area in Crimea, Prime Minister Dmitry Medvedev said yesterday.

The announcement of the Japan zones “could be key in highlighting the re-acceleration of Abenomics,” Robert Feldman, head of Japan economic research at Morgan Stanley MUFG Securities in Tokyo, said in a March 27 report. The special-zone council includes “die-hard pro-reformers” so “Abe will have ample chance to push the third-arrow agenda,” he said.

The government plans to unveil the second stage of its growth strategy in June, in which it may signal plans to cut corporate taxes.

To contact the reporters on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net; Maiko Takahashi in Tokyo at mtakahashi61@bloomberg.net

To contact the editors responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net Andy Sharp, James Mayger

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.