Japan’s government may have to sell more bonds than initially planned to fund an upcoming stimulus package, a senior ruling party official said yesterday.
“We have an extra pool of ¥900 billion [US$10.5 billion] and we can also spend half the ¥1.6 trillion surplus from the fiscal 2009 budget,” Koichiro Gemba, head of the Democratic Party of Japan’s (DPJ) policy board, said on Fuji TV.
“Depending on the situation, we may issue more deficit-covering bonds” if that ¥1.7 trillion total isn’t enough, he said.
Faced with meager growth and a strong yen, the country’s leaders are moving toward injecting more stimulus measures to fight a sharp slowdown in momentum.
A new package would set Japan apart from the rest of the developed world, which is winding down stimulus steps even as worries grow about a cooling global economy.
GDP data earlier this week showed Japan grew at an annualized rate of just 0.4 percent in the April-June period, down from 4.4 percent the previous quarter. As a result, the country lost its place to China as the world’s No. 2 economy.
However, it will be a tricky task for Japanese Prime Minister Naoto Kan, who is also juggling a promise to reduce the country’s massive debt and a possible challenge for leadership of the DPJ next month.
Kan has asked his ministers to come up with fresh proposals to support the economy. The yen’s climb to a 15-year high against the US dollar, threatening to erode exporters’ profits, has also aroused concern among policymakers.
“Of course we have to consider fresh fiscal spending,” Kan told reporters, according to Kyodo news agency on Friday, but “it seems possible to boost demand or stimulate the economy without depending on fiscal spending.”
Separately, the country’s finance minister indicated a cautious stance on taking on more debt, which is almost double the size of GDP.
“It is our mission to both stimulate the economy and restore public finances,” Japanese Minister of Finance Yoshihiko Noda said.
“As for whether we need to issue new government bonds [to finance the stimulus], this is something we should determine while closely monitoring economic movements,” Noda added.
Kan is aiming to compile and approve new measures by the end of next month, according to the Nikkei Shimbun on Friday.
The government could tap into a reserve fund in this year’s budget as well as a surplus from last year, which total ¥1.7 trillion, JPMorgan Securities Japan chief economist Masaaki Kanno said in a report.
Kyohei Morita, chief economist at Barclays Capital in Tokyo, said the government also needed to consider cutting corporate taxes and extend its “eco-point” program for energy efficient appliances, set to expire in December.
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