Japan Prime Minister Shinzo Abe's revamped economic growth strategy unveiled on Tuesday fell short of its hype, failing to provide critical details on how the proposed reforms would be employed.
"We were provided with the reform path but we're still light on an implementation timeline, so it'll be a case of wait-and-see for the detailed implementation and how that might unfold," Matthew Hegarty, equities analyst at Perennial International told CNBC on Wednesday.
Structural reforms, the "third arrow" in Abe's radical strategy to revive the economy or Abenomics, are seen as critical for putting Asia's second largest economy on a sustainable growth path. However, unlike the first two "arrows" of monetary stimulus and fiscal spending, the third arrow has yet to be deployed in earnest.
Abe's latest plan, which builds upon a growth strategy he first unveiled last June, called for corporate tax rate cuts, a bigger role for women and foreign workers and easing long-standing regulations in areas such as agriculture and health care. But there was nothing new to the measures, analysts say, many of which were featured in the plan's final draft presented earlier in the month.
"This is the second attempt for Abenomics – and maybe this one looks a little more promising at the onset," said Lars Peter Hanson, a professor at the University of Chicago. "(But) it's one thing to announce these principals. Until we fully understand how they are going to be executed and carried out with specificity, it's hard to have full confidence in it."
The Nikkei 225 eased half a percent on Wednesday reflecting investor doubts over the planned reforms. This echoes similar falls in the Japanese benchmark index last year when the first version of the third arrow was unveiled, as markets panned the plan as short on important details.
"Most of the details announced were widely expected and unlike the first and second arrows which involved massive monetary stimulus, the third arrow focuses on structural changes that could take a minimum of a year or two to yield results," said Kathy Lien, managing director at BK Asset Management.
Nicholas Smith, equity strategist for brokerage CLSA, noted there was nothing in the package to "knock the socks off the equity market. From the stock market point of view, we have heard a lot of this already," he said.
Corporate tax, pension reforms in focus
Corporate tax and public pension fund reforms are two policy areas being closely watched by investors.
The government is planning several stages of corporate tax cuts starting next fiscal year, to bring the rate down to 30 percent from the current 36 percent.
According to Robert Pavlik, chief market strategist at Banyan Partners, while lowering corporate tax rates will be beneficial, the proposed level is not low enough especially when compared to other developed Asian nations. Australia has a tax rate of about 30 percent for businesses, while in financial hubs Singapore and Hong Kong the levels are roughly 17 percent.
Meanwhile, Abe is calling for more independence for the country's $1.26 trillion Government Pension Investment Fund (GPIF), so it can take on more risk like its counterparts in Europe and North America. If this takes place, it could shift hundreds of billions of dollars out of domestic government bonds into stocks and overseas assets.
Hegarty of Perennial International is not holding his breath. "With regard to the pension fund –whether it can really be convinced to be more aggressive in portfolio implementation – again it's going to be a case of wait and see," he said.