Abe's arrows: Japan goes back to the future for economic zones On his farm in Japan's northern Iwate prefecture, Sachio Egawa produces almost everything a visitor might want for the dinner table, from rice and beef to mushrooms and wild blueberries. During the frigid winters that envelop the region, the 64-year-old even hunts bears and deer for stew. Until a few years ago, about the only thing he couldn't supply - at least not legally - was alcohol. Though home-brewing sweet, unfiltered sake known as doburoku is a common enough practice among Japanese farmers, the custom is illegal. "It was bootlegging, essentially," Mr Egawa remembers. If you made your own, it was like you were taking tax money away from the government. Mr Egawa's outlaw status changed in 2004, however, when he became the first person in Japan to receive permission to micro-brew doburoku. His town, Tono, had won an exemption from restrictive licensing rules from the government of Junichiro Koizumi, the reform-minded prime minister of the day, who was backing initiatives for local deregulation. Today the idea of targeted deregulation - known in Japanese as tokku, or "special zones" - is getting a flood of new attention, having been revived by Mr Koizumi's protégé, Shinzo Abe, as part of the campaign to rekindle growth known as Abenomics that he launched after coming to power nearly a year ago. "People came up here in tour buses because they heard that this phantom sake was available," remembers Mr Egawa, who now takes orders online in what has become a thriving business. In his living room, alongside a pair of stuffed pheasants, is a commemorative photo of himself pouring a cup of doburoku for Mr Koizumi. Mr Abe's expanded tokku are the pointy end of the so-called third arrow of Abenomics - structural reforms intended to raise Japan's long-term potential growth rate, now estimated at less than 1 per cent. Monetary easing and "flexible fiscal policy" or stimulus spending accounted for the first two arrows. Many, including Mr Abe, say such reforms are essential to turning the economic upswing that has been driven by Abenomics" monetary and fiscal stimulus into a more sustained expansion. The premier wants to use tokku to open up tightly regulated industries and transform Japan into, in his phrase, "the easiest country in the world for companies to operate." Not everyone thinks the tokku scheme will work. Mr Koizumi conceived of his zones as laboratories whose regulatory experiments, if they succeeded, could be adopted nationwide. Critics, though, say few of the roughly 1,000 initiatives implemented over the past decade have had much impact, and that when they have it has mostly been local, bringing little benefit to Japan's overall economy. "Bureaucrats have seen them as a way to secure bigger budgets or additional powers," says Mio Uemura, an analyst at Mizuho Research Institute. She calculates that most tokku have involved disguised forms of public works spending rather than the sort of regulatory change that allowed Mr Egawa to start making sake. Officials are loath to grant legal exemptions but happy to use the scheme to secure funding for pet projects. "For the local governments, it's easier to ask for money than deregulation," she says. Specific proposals for Mr Abe's new tokku will be considered early next year, but the premier has promised that they will be bigger and bolder than Mr Koizumi's, with a focus on major cities and industries with significant economic potential. One place that is planning to apply is the western city of Kobe, which over the past 15 years has grown into a hub for biotech and medicine. Its officials want the government to lift restrictions on the number of hospital beds in the city and to make it easier for foreign doctors to practise there. Kobe was also a tokku under Mr Koizumi's programme, however, and its experience shows that being designated means little in itself. Researchers and city workers say their deregulation proposals went nowhere: plans to remove barriers to research into stem cells, for instance, were rejected by authorities in Tokyo. "The tokku was never much use to us," says Masayo Takahashi, an ophthalmologist in Kobe who is leading the first clinical trial in the world involving induced pluripotent stem cells, or iPSCs, a type of stem cell derived from adult tissue. Mr Abe is now backing the technology, but on a nationwide basis. On the sake front, the doburoku scheme has been replicated in dozens of other towns, but it has never made the intended jump from local exception to national legal reform. And there are still plenty of hurdles and restrictions: producers must be farmers; they can only use rice they grow themselves; and though they may sell their output it cannot be taken outside the tokku zone. It took Mr Egawa two years to get his first-of-a-kind permit a decade ago, but he was lucky. The media attention and temporary monopoly he enjoyed allowed him to build a brand, increase production and ultimately qualify for a regular brewer's licence. He remembers his first years under the tokku scheme as being full of furtive trading. "The clever guests would buy large amounts and say they were going to drink it in their rooms," he says, "but it was obvious they were stashing it away to take home." Next in the series: Japan's companies have benefited from a weaker yen so will Sinzo Abe get what he wants - higher wages?