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Abe Delays Labor-Rules Reform Amid Resistance, Nikkei Says

Oct. 18 (Bloomberg) -- Japan’s government has put off key labor market deregulation, the Nikkei newspaper reported today, as Prime Minister Shinzo Abe faces resistance to his reforms 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 said. While the government proposes considering extending the length of employment contracts for highly skilled, highly paid workers, details will be worked out in a bill to be submitted to parliament next year, a document released today by the Cabinet Office showed.

Any freeing up of labor rules would give companies more flexibility as Abe implements the “third arrow” of his 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.

“The market will have to learn that this is going to be a slow process,” said Daiju Aoki, senior economist at UBS AG in Tokyo. “Labor rules are a vital area for Abe’s growth strategy and improving them would have symbolic meaning, but it will be a long time before we see reform.”

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“Bold regulatory reform is vital to attract investment from overseas and strengthen companies’ competitive power,” Abe told a meeting of the cabinet ministers today. “This is just the beginning” of these reforms, Abe said.

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

A labor consultation center will be set up in special economic zones to help companies understand and navigate Japanese labor law, according to the Cabinet Office document. Other proposed regulation changes, including lifting restrictions on working hours for white-collar workers, will not go ahead, the Nikkei said, following a similar report by Kyodo News yesterday.

To contact the reporters on this story: Isabel Reynolds in Tokyo at ireynolds1@bloomberg.net; Takashi Hirokawa in Tokyo at thirokawa@bloomberg.net

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

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