Japan needs more fiscal stimulus

TOKYO: Japanese Economy Minister Seiji Maehara said the country needs more monetary easing and policy efforts to encourage growth as the government prepares for election against an opposition that has stronger public support.

The government planned to inject about 200 billion yen (US$2.5bil) into the economy, Maehara said on a Fuji Television programme, without giving details on the source of those funds.

Spending this fiscal year included 910 billion yen of stimulus programmes requiring parliament’s approval, 400 billion yen for

earthquake recovery and a further 347.8 billion yen, he said.

“There are fiscal-easing moves worldwide, but on a monetary basis Japan is falling short,” Maehara said yesterday.

While “easing is not a panacea,” without that and policy moves “Japan’s sovereign credit rating may face a downgrade.”

The government on Oct 12 issued a downgraded assessment of Japan’s economy for a third month, the longest streak since the 2009 global recession, as gains in the yen and slowing overseas demand hurt exporters. Prime Minister Yoshihiko Noda, who last week ordered his Cabinet to draw up economic stimulus measures by November, failed to reach agreement with the two largest

opposition parties on passing legislation needed to fund spending amid a standoff over the timing of a general election.

Noda met on Oct 19 with Liberal Democratic Party leader Shinzo Abe and New Komeito head Natsuo Yamaguchi. The two parties supported legislation passed in August doubling

It seems to me that ‘soon’ doesn’t mean next year. Prime Minister Noda is a person who honours his promises. — SEIJI MAEHARA

the 5% sales tax in return for Noda’s pledge to call elections “soon,” and are blocking authorisation of deficit-financing bonds until the prime minister follows through.

“It seems to me that ‘soon’ doesn’t mean next year,” Maehara said, suggesting that Noda may call the election as early as this year. “Prime Minister Noda is a person who honours his promises.”

Noda is Japan’s sixth prime minister since 2006, and the third for the Democratic Party of Japan since it defeated the Liberal Democratic Party in 2009 after the LDP’s half-century domination of government.

He has been unable to reverse more than a decade of deflation and his biggest legislative achievement was a sales tax increase that risks damping consumption.

Noda’s approval rating was 34% in a Yomiuri newspaper poll published on Oct 3, compared with 65% when he took office 13 months ago. Support for his DPJ was at 18%, while that of the LDP was 28%.

Almost 45% had no party preference. Noda isn’t legally obliged to dissolve the lower house of parliament and call an election until August next year.