• Prime minister brushed off speculation of stimulus on Tuesday
  • Abe reiterates it would require big shock to delay tax rise

Just a day after parliament passed a record budget for the fiscal year starting April 1, Japanese Prime Minister Shinzo Abe said he was considering a new economic stimulus package ahead of elections this summer, public broadcaster NHK reported Wednesday.

Abe made the remarks to Natsuo Yamaguchi, head of junior coalition partner Komeito, NHK said, without saying where it got the information. Abe on Tuesday brushed off suggestions that the government would announce stimulus steps -- which some members of his own party said could amount to as much as 10 trillion yen ($89 billion).

Abe reiterated that Japan will go ahead with a plan to increase the sales tax next year, barring a major economic shock on a scale of the collapse of Lehman Brothers or a major earthquake, NHK reported. Yamaguchi was quoted as saying that Komeito was ready to respond if, as speculated by some local media, Abe were to call a snap lower house election this summer to coincide with a poll in the less-powerful upper chamber.

The situation is reminiscent of late 2014, when -- amid similar speculation -- Abe called a snap general election and postponed a planned sales-tax increase after repeatedly denying he would.

Public debt is piling up and the Bank of Japan’s unprecedented asset-purchase program and negative-rate policy has so far been unable to stoke inflation and break a cycle of economic expansion and contraction. With some economists suggesting that central banks are reaching their limits, the onus is falling back on governments to deliver fiscal stimulus and structural reform.

The Nikkei business daily reported over the weekend that the government would probably announce a supplementary fiscal package on Tuesday.

Data on Wednesday showed Japan’s industrial production dropped the most since the March 2011 earthquake as falling exports sapped demand and a steel-mill explosion halted domestic car production at Toyota Motor Corp. This casts a shadow over gross domestic product in the first three months of the year, putting the world’s third-biggest economy at risk of contraction.

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