Billionaire investor Daniel Loeb, whose Third Point hedge fund has recently pushed for change at Japanese companies, said on Wednesday that he approved of the Bank of Japan's monetary policy move, but added corporate reform is still needed to help revive growth.
The Japanese central bank announced earlier on Wednesday it would target interest rates on government bonds and Loeb said the move will have "very positive implications for the market."
Loeb, whose $16 billion Third Point fund has been investing in Japan for years, was speaking at the Reuters Newsmaker event featuring Japan's Prime Minister Shinzo Abe.
After making bets on Japanese companies ranging from Sony, to robot maker Fanuc and most recently retailer Seven & i Holdings Co Ltd, Loeb said foreign investors are being welcomed more now. Some large Japanese institutions agreed with his views, Loeb said, noting he has "allies" in Japan and "our interests are aligned."
Loeb said he had looked at investing in Nintendo, but stopped short, though he approves of the company's expansion into mobile technologies.
He said he and Japanese investors are looking for the same thing: to have better-run businesses whose benefits will eventually spread "far and wide." But he added that the potential for increased government protection of small- and medium-sized companies was misguided.
"Let the market determine where workers' labor is best allocated, let people who allocate capital determine that," Loeb said.
As Japan struggles to reignite growth, Loeb said central bankers around the world, including in Japan, had relied for too long on monetary policy to stimulate economic expansion.
"We've all relied too much on monetary policy," Loeb said, adding: "They used to call it the punch bowl. I say we've got to take the crack cocaine pipe away and start focusing on real fiscal policy and structural reforms."
Loeb was referring to a saying popularized by a central banker that he and his central banking colleagues needed to take away the punch bowl, or stimulus.
Abe, who returned to office in December 2012 for a rare return as prime minister pledging to reboot the economy with his "Abenomics," a mix of ultra-easy monetary policy, fiscal spending and reforms, told the Reuters audience that the economy remained his top priority.
Abe said his government would seek quick approval by parliament of the Trans-Pacific Partnership (TPP) trade pact and urged the United States to do the same.
Loeb agreed that the TPP is critical. "Some of it is to ... get TPP approved," he said, adding that "some labor reforms, corporate governance, any regulatory restrictions that prevent companies from investing or growing," are also important.
Third Point has long ranked among the hedge fund industry's best performers, returning an average 19 percent a year since its launch two decades ago. This year, Loeb's returns have climbed just 7 percent, topping the average hedge fund's 3.4 percent return.