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Abe seeks to reboot Abenomics with shift to social spending

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(Bloomberg) — Prime Minister Shinzo Abe unveiled a new economic growth target and vowed to halt Japan’s population slide, as he seeks to claw back support after the passage of unpopular defense bills.

See also: In Japan, the rise of the machines solves labor and productivity

Abe made the remarks following his official reappointment Thursday to a second three-year term as leader of the ruling Liberal Democratic Party. Shifting his focus, he avoided mentioning his trademark policies of monetary easing, fiscal spending, as well as tricky regulatory reforms that many economists say are already too slow.

Instead, he laid out what he called the three new “arrows” of his Abenomics plan:

  • A strong economy — with a new gross domestic product target of 600 trillion yen ($5 trillion), up from the current 500 trillion yen. He gave no time-frame for achieving this goal.

  • Increased support for families with children to help increase the fertility rate to 1.8 births per woman, up from 1.43 in 2013.

  • Social security, including help for those who combine work and care for elderly relatives.

Abe said he would combat the demographic woes facing Japan, whose 127-million population is aging and shrinking, threatening its status as the world’s third-largest economy.

“We will put the brakes on the trend toward an aging population and the falling number of children and keep the population at 100 million 50 years from now,” Abe said at party headquarters in Tokyo, without spelling out how this would be achieved. “I want to make that clear to the nation.”

Since he took office in December 2012, massive monetary stimulus and fiscal spending have weakened the yen about 30 percent against the dollar, boosting exporters’ profits and stock prices, while failing to produce the promised mild inflation. Economists have called for more deregulation, especially in the labor market, to encourage corporations to invest their record cash reserves and bolster growth.

The economy shrank in the three months from April through June, and for two quarters last year after the national sales tax was increased. Abe insisted Thursday he would go ahead with a second increase in the consumption levy as planned in 2017, unless there were an unexpected event similar in scale to the 2008 financial crisis.

Abe’s change in policy direction comes after his bills to expand the role of Japan’s military — criticized by many as a breach of the country’s pacifist constitution — triggered huge protests outside parliament. Support for his cabinet fell to 39 percent in a poll published by the Kyodo news agency on Sept. 20, while about half the respondents said they disapproved of his government.

“The result of Abe’s security policies has been that public approval has tumbled,” said independent political analyst Minoru Morita. “He is probably worried about that and is turning back to the economy as a way to claw back public support.”

The government has had a growth target of boosting nominal GDP annually by 3 percent, on average, over the medium-to-long term. Its target for real growth (which discounts inflation) is 2 percent, compared with an actual figure of minus 0.1 percent in 2014 and a projected expansion of 0.7 percent this year.

On Thursday, he pledged to introduce policies that would make it easier for young people to marry and plan families. He also vowed an increased focus on tackling child poverty, and to reduce to zero the number of people forced to leave their jobs because of the demands of caring for elderly relatives.

“His intention to tackle the demographic issue is good,” said Masamichi Adachi, senior economist at JP Morgan Securities Japan. “I’m totally in agreement with that.”

See also: Japan mulls politically dangerous squeeze on senior benefits

Even so, the former Bank of Japan official said that the growth target isn’t meaningful as Abe didn’t explain how, or even when, he hoped to achieve it.