Abenomics Honeymoon Success Hangs on Deregulation, Orix Says

Orix CEO Yoshihiko Miyauchi
Yoshihiko Miyauchi, chairman and chief executive officer of Orix Corp., poses for a photograph at the company's Tokyo headquarters in Tokyo. Photographer: Kiyoshi Ota/Bloomberg

Prime Minister Shinzo Abe’s success in rebuilding Japan’s economy will depend on his ability to remove regulatory hurdles, the so-called “third arrow” of Abenomics, Orix Corp.’s chief executive officer said.

“Abenomics has been good so far, and I would give almost full marks to his monetary and fiscal policies,” Yoshihiko Miyauchi, who heads the Japanese financial services firm, said in an interview on June 24. Still, “a failure in releasing the third arrow could turn Japan’s honeymoon into divorce.”

Under Abe, Japan is rolling out unprecedented monetary easing and spending $105 billion to reverse more than 10 years of deflationary malaise, measures that weakened the yen and made Japan the best-performing major stock market this year. The economic revival hinges on the deregulation of labor, medical services, education and agriculture, said Miyauchi.

The prime minister said this month that autumn would be the soonest his government presents a legislative growth strategy to accompany monetary and fiscal stimulus -- the first two arrows of his policies dubbed Abenomics.

Japan’s Nikkei 225 Stock Average has gained 23 percent this year, even after slumping since late May. Shares of Orix, which offers services ranging from leasing and insurance to real estate and private equity, have jumped 22 percent. The stock closed 0.2 percent lower at 1,180 yen today, and the Nikkei 225 declined 1 percent to 12,834.

“If the Nikkei ends this year between 17,000 and 18,000, it’s a sign that Abenomics is successful,” said Miyauchi, 77, who headed governmental advisory panels on regulatory reform from 1996 to 2006.

Deregulation Targets

Abe on June 5 vowed to deregulate the energy, health and infrastructure industries and double foreign investment to 35 trillion yen ($357 billion) by 2020.

He also plans to boost power industry investment to 30 trillion yen within a decade and triple the use of public-private partnerships to 12 trillion yen to fund infrastructure projects such as airports, waterworks and highways. He didn’t address changing labor laws making it easier for companies to eliminate jobs.

“I want the government to hammer out policies that can get rid of obstacles for businesses and energize the private sector, not just provide them with subsidies,” Miyauchi said.

Takeover Targets

Miyauchi will continue to seek acquisition targets, with as much as 150 billion yen to spend on assets, he said. He struck an agreement in February to buy Dutch bank Rabobank Groep’s Robeco Groep NV asset-management unit for 1.94 billion euros ($2.5 billion). Orix has also announced investments this year in financial firms in Saudi Arabia and Mongolia.

“We have no specific takeover target at the moment,” Miyauchi said, adding that he’s interested in Asia and the Middle East. “If nothing pops up, we may consider returns to shareholders.”

Shareholders’ equity at Orix rose 19 percent last fiscal year to 1.64 trillion yen as of March 31 after the Tokyo-based company converted bonds into stock, according to an earnings presentation posted on its website.

Orix in the past year announced acquisitions worldwide valued at more than $3 billion, up from about $460 million a year earlier, according to data compiled by Bloomberg.


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