TOKYO • Japanese Prime Minister Shinzo Abe has abandoned for now a key labour law reform aimed at boosting productivity after admitting data used to support the change was flawed, an embarrassing political climbdown likely to disappoint businesses and investors.
Mr Abe had pledged to pass in the current session of Parliament, set to end in June, a package of reforms to increase labour market flexibility and allow a more efficient allocation of resources, a core part of his "Abenomics" recipe for growth.
But after weeks of defending the reforms against opposition attack, Mr Abe yesterday confirmed one of the most contentious parts of the package would be dropped for now, with the government admitting that some supporting data was flawed.
The change would have expanded a system of "discretionary labour" where employees are regarded as having worked a certain number of hours and paid a fixed wage regardless of how long they actually work.
To support his argument, Mr Abe cited Labour Ministry data showing working hours for those under the discretionary system could be shorter than for employees with normal work conditions.
However, the opposition spotted dozens of inconsistencies in the data including statistics showing overtime of "45 hours per day".
The data scandal has dominated the front pages of Japan's national papers, with the liberal Asahi daily saying yesterday that it had resulted in "damage" to the Abe administration. The mass circulation Yomiuri said Mr Abe had made the decision to "minimise the damage" to his political capital ahead of a party leadership election later this year.
"We've decided to delete every single element of discretionary labour from the reform Bills at this time and have the Labour Ministry grasp the actual situation once more, and then to debate over again," Mr Abe said.
Mr Abe came to office in December 2012 promising to revive the economy with "three arrows" of his Abenomics policies: hyper-easy monetary policy, fiscal spending and structural reforms.
Critics say he has lagged on the third part of this agenda.
"In economic terms, labour reform was going to be the core of the productivity 'revolution' that he was going to engineer," said Mr Jesper Koll, head of equity fund WisdomTree Japan. "When you ask 'what else is there?', the answer is a yawning emptiness."
Another part of the package would expand the categories of highly skilled and highly paid professions with no limits on their working hours. That provision remains, but is already facing similar opposition attacks. Some members of Mr Abe's Liberal Democratic Party favour cutting out this provision, too.
Another proposed reform is a legal cap on overtime of 100 hours a month - an effort to end the phenomenon of "karoshi" - or death from overwork.
Critics on one side of the debate say that cap would effectively condone a level of overtime that is harmful to workers' health. On the other side, some economists say setting the cap cuts management flexibility.
REUTERS, AGENCE FRANCE-PRESSE