Japan may adopt extra budget despite solid economy
TOKYO: The Japanese government is widely expected to compile an extra budget for this fiscal year, despite the improving economy, economists polled by Reuters say.
Compiling extra budgets has become a habit for Japan as it struggles to shore up stagnant activity with funds for everything from shopping vouchers and aid for struggling rural regions to reconstruction after the 2011 tsunami and nuclear disaster.
This year, however, the Japanese and global economies are in good shape, and 31 out of 35 analysts polled in the Sept 5-12 survey said there was no need for an extra budget, besides steps for natural disaster relief.
“The economy is at full employment conditions and the global economy is steadily expanding,” said Hiroaki Mutou, chief economist at Tokai Tokyo Research Institute. “It would not be acceptable to compile a huge extra budget.”
However, 22 economists predicted that the government would stick with its pattern and pass extra spending anyway, the poll showed.
Mutou said the government might announce a small supplementary budget for the year through March, aimed at areas such as lifting Japan’s falling birthrate and education.
Both Chief Cabinet Secretary Yoshihide Suga and Economy Minister Toshimitsu Motegi have said there are no plans for a supplementary budget.
Boosting government spending would likely add to Japan’s debt burden, which is already more than twice the size of its GDP. Analysts have long warned Japan’s public finances would collapse if its debt problem goes unsolved.
The poll also showed that most analysts believe the Bank of Japan (BoJ) will keep its current pace of monetary easing until at least late next year as the pace of gains in consumer prices remain very slow, even though the economy is growing.
A majority of the analysts polled say the BoJ’s next move will be to scale down current stimulus measures, rather than expanding monetary easing.
In July, the BoJ maintained the 0.1% interest it charges on a portion of excess reserves that financial institutions park at the central bank. It also kept its yield target for 10-year Japanese government bonds around zero per cent. — Reuters