Business News

Japan Missed Its Window to Revive Economy: Expert

Geraldine Tan|Assistant Producer, CNBC Asia Pacific

Japan had a fighting chance in reviving its faltering economy after the March 11 earthquake but its politicians have failed to take hold of that opportunity, an analyst told CNBC on Friday.

That was evident after the country’s factory output fell in September – its first decline since the devastating earthquake.

“They (Japanese politicians) have spent some money but they’ve not made any of the reforms that would have been necessary… especially in the form of deregulations,” Uwe Parpart, MD & head of research at Reorient Financial Markets said. “If politics goes wrong, pretty much everything else goes wrong.”

Previously a bull on Japan, Parpart now says Japan’s strength as an industrial society is fading in the international arena because it is still over-regulated.

“Virtually all sectors of the domestic economy are excessively regulated, from the number of taxis per square kilometer to the number of restaurants... There is very little room for entrepreneurial initiative. (And the) lack of competition drives up prices; stifles innovation and so on,” he explained.

Parpart believes the Bank of Japan’s latest measures to expand its asset-purchasing program by another 5 trillion yen to mitigate the yen’s strength and lingering euro zone debt woes, will not be enough to bolster the economy.

“There really are no monetary policy remedies. I think this is barking up the wrong tree entirely. We’ve basically been at zero rates in Japan for… over a decade and… monetary policy has been found ineffectual,” he said.

“What has to happen is a significant fiscal consolidation and a regulatory situation when there is deregulation writ large,” Parpart reiterated.

He sees no good reason to buy into Japan as the strong yen poses a huge risk.

“What if the yen ever went down? The market would have to do enormous things in order for you to be able to shoulder the currency risks. So I’ll be very careful with Japanese equities at this point in time.”