By Vivienne Russell | 23 January 2014

Japan’s is set to break free of the chronic deflation that has plagued the country and is ‘getting back on track’ to fiscal consolidation, Prime Minister Shinzo Abe told the World Economic Forum in Davos.

‘It is not twilight but a new dawn that is breaking over Japan,’ Abe told delegates.

‘I am willing to act like a drill bit strong enough to break vested interests. Over the next two years, no vested interests will remain immune from my drill.’

Among the reforms enacted by Abe’s government, dubbed ‘Abenomics’, is a lowering in the corporate tax rate by 2.4 percentage points, set to take effect in April, and a hike in consumption tax from 5% to 8%. The top rate of tax has also been brought down to 35.6% from 38%.

Abenomics attempts to combine aggressive monetary policy with a flexible fiscal policy and structural economic reforms in a bid to rid Japan’s economy of deflation and halve the deficit by the 2015 fiscal year.

Abe pledged to continue with reforms, including increasing the number of women in senior business posts and giving foreign shareholders more of a say in the governance of Japanese companies.