Japan’s government may consider further measures to jolt the economy out of a recession, Japanese Finance Minister Shoichi Nakagawa said.
If the ¥5 trillion (US$52 billion) stimulus plan unveiled last month is insufficient, “we may think beyond it,” Nakagawa said in an interview with Bloomberg Television in Tokyo yesterday.
For now, the government is focusing on implementing the package and an earlier plan announced in August, he said.
Leaders from the G20 last weekend urged governments to consider fiscal stimulus measures as part of a “broader policy response” to the global financial crisis. Japan is the most indebted nation in the industrialized world, limiting the government’s ability to spend more money bolstering an economy that shrank in the each of the past two quarters.
While a supplementary budget was passed last month to pay for ¥1.8 trillion in spending in the first package, the second is being held up as the government considers how to fund it. Ichiro Ozawa, leader of the opposition Democratic Party of Japan, met on Monday with Japanese Prime Minister Taro Aso and urged him to quickly submit a second extra budget, the Asahi Shimbun reported.
“At the moment we definitely need to avoid the situation” that last month’s stimulus will be held up because of political wrangling, Nakagawa said.
GDP fell at an annual 0.4 percent pace last quarter after shrinking 3.7 percent in the previous three months, the Cabinet Office said on Monday. Japan’s economy last contracted for two consecutive quarters in 2001.
“The GDP report showed Japan’s economy is on downward trend,” Nakagawa said.
It’s becoming “very difficult” to rely on exports for economic growth, so efforts should focus on stimulating spending at home, Nakagawa said.
“We need to maintain growth in domestic demand, which at this point is slightly positive,” he said.
Economic and Fiscal Policy Minister Kaoru Yosano said yesterday that he was “not confident” the economy will expand next year.
The Organization for Economic Cooperation and Development (OECD) predicts Japan will shrink 0.1 percent next year, and the IMF estimates a 0.2 percent contraction.
Nakagawa said the government maintains its pledge to balance the budget by the year starting April 2011, though the immediate priority is to steer the economy toward a recovery. Japan’s public debt exceeds 180 percent of GDP, the OECD estimates.
RISKS IN CHINA
Separately, the risks of an economic downturn in China are growing and protectionist sentiment abroad could hurt global growth, the country’s central bank said yesterday.
“The impact of the international financial crisis is intensifying, and the uncertainty of the domestic economy is increasing. The risk of an economic slowdown is expanding,” the People’s Bank of China said in a quarterly report.
China’s economic growth slowed in the latest quarter to 9 percent, down from last year’s 11.9 percent.
That prompted Beijing to launch a multibillion-dollar stimulus package on Nov. 9 that aims to boost growth through heavy new spending on construction, tax cuts and aid to the poor and farmers.
The central bank said it would make sure adequate credit is available to support the stimulus.
The central bank warned of protectionist sentiment in reaction to the slowdown and said it might hurt global growth.
“With the slowdown of the world economy and rising unemployment, anti-globalization, represented by trade protectionism, is likely to exist for a long time,” the bank said. “It will cause a negative impact on the sustainable, healthy development of the world economy.”
MORE IN MALAYSIA?
Meanwhile, Malaysia may introduce more measures to stimulate economic growth and counter the worsening global financial crisis, Deputy Prime Minister Najib Razak said yesterday.
The government earlier this month announced a 7 billion ringgit (US$2 billion) stimulus program, warning that growth would slow substantially next year.
“We are open to additional measures from time to time ... we are watching and monitoring the situation very carefully and closely,” the Bernama state news agency quoted Najib as saying.
Najib said the government was confident of achieving its growth target of 5 percent this year and 3.5 percent next year by ensuring strong domestic demand.
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