Japan PM Kishida unveils economic action plan on 'new capitalism'

Japanese Prime Minister Fumio Kishida's government on Tuesday unveiled an action plan on his "new capitalism" programme of driving growth and wealth distribution through wage hikes, signalling his commitment to shift the economy into a higher gear.

Kishida's economic strategy will focus on investment in human resources, science and technology, innovation and start-ups, as well as green and digital transformation, as key driver of growth.

The action plan and separate mid-year economic policy framework are expected to be approved by Kishida's cabinet later this month.

Some lawmakers are speculating that the prime minister may call a snap election to solidify his position.

While the ruling Liberal Democratic Party (LDP) and its small ally Komeito are unlikely to lose to opposition parties that are in disarray, a weak showing at the election could cost Kishida his job.

"With wages at 30-year high and appetite for investment firming up, forces are falling into place which will break up a vicious circle seen in the past years," a summary statement of the action plan said.

Cautious Japanese firms offered annual wage hikes of more than 3% at this year's wage talks given the need to lure workers against the backdrop of high inflation and a labour crunch.

Kishida's government is piling pressure on Japanese firms to foster a higher wage environment and make the job market more flexible. The government's plan calls for minimum wages to reach national average at 1,000 yen this year versus 961 yen at present.

Among other initiatives, it also called for targeted government spending on green and digital transformation to serve as catalysts for private-sector investment.