Abe's third arrow is Japan PE's 'best-ever chance' - AVCJ Forum

Speaking at the AVCJ Japan Forum in Tokyo, Anthony Miller, CEO of PAG Japan, said he was optimistic about the prospects for Japanese private equity and the economy as a whole in the context of the current administration's policies.

Abe's "three-arrows" economic strategy - known as Abenomics - was launched over a year ago. The first two arrows comprised short-term monetary and fiscal measures, such as quantitative easing and interest rate adjustment. However, recent months have seen the government and the business community focus on the third arrow of regulatory change and long-term structural reform.

"Private equity has been in Japan since 1987 and we have seen the ups and down of many administrations," Miller said. "But I will go out on a limb and say that this is best chance I have ever seen for Japan."

Miller added that private equity and the wider business community are benefiting from an effective leadership that has consolidated control of both houses of parliament - something he noted most governments in the world wish they had.

"The current government has shown that it is determined to grow the country's economy again, which is something we haven't seen in 10 years or more," said Kei Mizukami, senior managing director with CVC Asia Pacific Japan.

He added that a consensus among corporations and consumers with regards to reform had helped add momentum to growth. Hiro Hirano, CEO of KKR Japan, said he was more cautiously optimistic, but stressed there had certainly been an improvment in sentiment compared to the pessimism of a decade ago.

"I would say it is better to describe the third arrow as a thousand needles of reform that need to be implemented and introduced," he said. "Some of those needles are working very well but some still need to be redefined."

Hirano noted that some areas - particularly agriculture and healthcare - that had previously been heavily regulated are now beginning to see change. 

PAG's Miller added that, within the broad remit of long-term reform, the government is also focusing on a number of other important areas, including labor legislation, corporate goverence reform, "womenomics," immigration, trade reform, and banking deregulation.

"Abe is not going to win on all those things, he knows it and the people around him know it, but even if he wins 20-30% it will make a big difference to the economy," he said. "We are very optimistic that Abe will cause disruption that will get large corporates to sell assets, and when they sell assets - and they really care about return on equity and corporate governance - that will be a landmark change that we can benefit from." 

William Saito, president and CEO of Intercur, summarized by highlighting several statistics he sees as cause for further optimism: the ruling Liberal Democrat Party has passed more than 98% of its bills, the highest total in years; Japan is one of only four governments globally with an approval rating above 50%; and since Abe has come to power the yen has depreciated by 16%, leading to a 6.7% rise in first-quarter annualized GDP.

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