Shinzo Abe’s government looks likely to disappoint on fiscal consolidation
TO REVIVE Japan’s economy Shinzo Abe, its prime minister, has loosed three arrows. Temporary fiscal stimulus, monetary easing and structural reform together make up the strategy known as “Abenomics”. But many reckon there needs to be a fourth dart in the quiver: fiscal consolidation over the longer term to tackle the country’s vast public debt, which is expected to approach 240% of GDP next year (see chart).
Mr Abe’s party, the Liberal Democratic Party of Japan (LDP), last year co-operated with its main rival, the Democratic Party of Japan (DPJ), to pass a bill to raise the consumption tax from 5% to 8% in April 2014 and up to 10% in October 2015. For Yoshihiko Noda, the DPJ prime minister at the time, the bill represented the end of a crusade by his party to get Japan back on fiscal track. The extra consumption-tax revenue of {Yen}13.5 trillion ($14 billion) meant that a goal set in 2010 of halving the primary budget deficit (ie, before interest payments) to 3.2% of GDP by 2015 looked achievable. This modest target would not reduce Japan’s debt, but the bill was at least a small step in the right direction.Then came Abenomics. The first arrow means spending an extra {Yen}10.3 trillion of stimulus on areas such as public works, reconstruction of the Tohoku region hit by the earthquake and tsunami in 2011, and other projects. This spending makes the debt problem worse in the immediate future and the 3.2% target well-nigh impossible to achieve. On the other hand it should boost economic activity, which would both lift tax revenues and make it easier to raise the consumption tax.
About bambooinnovator Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments.
KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community.
KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.
H.E.R.O. stands for “Honorable. Exponential. Resilient. Organization.” and is operationalized into a unique, systematic 4-step investment process to identify the winners. The investment objective seeks to capture long-term investment returns created by disruptive forces and innovation by focusing on high-quality and liquid listed equities in the Asia-Pacific region that ride on and benefit from them. Through our cross-sector and in-depth fundamental research process, the Fund aim to provide access to companies whom we believe are run by high-integrity, honorable and far-sighted owner-operators with a higher sense of purpose in solving High-Value Problems for their target customers and society, and have unique, scalable and wide-moat business models with sustainable competitive advantages and innovative products, services, and processes to create, expand and service their total addressable market, including the resiliency and balance sheet strength to maintain or grow profitability, pricing power and market positions through up/downturns in the economy.
About bambooinnovator
Bamboo Innovator 