Abe Aide Takenaka Urges Swift Extra Budget Followed by BOJ Moveby , , and
Yen in 'comfortable' trading range, former minister says
Takenaka says important to flesh out policy direction now
Japan should assemble a stimulus package to shore up its economy before the central bank further cranks up a campaign of unprecedented easing, an adviser to Prime Minister Shinzo Abe said Tuesday.
“It would be good to do an extra budget in the autumn, then see how it goes and add more monetary easing,” Heizo Takenaka, 64, a former economy minister who serves on a government panel on competitiveness, said in an interview in Tokyo. A combination of Bank of Japan action and fiscal measures would be the most effective approach, he said.
Takenaka’s comments come as Japanese stocks slide amid growing concerns that the world’s third-largest economy may be hurt by a slowdown in China. In a change of tack after a grueling debate on security that undermined his public support, Abe last week unveiled a three-pronged plan to revive the economy. He vowed to expand national output by 20 percent, provide more support for child-rearing and bolster social security.
Economists have criticized Abe’s speech for a lack of detail on how or when growth targets would be achieved. Yoshimitsu Kobayashi, chairman of the Japan Association of Corporate Executives, said Tuesday that Abe’s aim of boosting gross domestic product to 600 trillion yen ($5 trillion) from the current 500 trillion yen was “impossible.”
Takenaka dismissed such comments, saying it’s possible to reach the growth target in the “foreseeable future” if the government realizes its promised real annual growth of 2 percent. This can be done by speeding up economic changes, he said.
“The prime minister has said he will re-set the course to economic issues and this has to be done skilfully,” Takenaka said. “If he can’t re-set, real reforms will fizzle out. It’s extremely important for him to set the direction and flesh it out at this stage.”
A spending package of about 5 trillion yen could be used to smooth the way for agricultural-sector changes following a potential agreement on the Trans-Pacific Partnership regional trade pact, as well as on improving infrastructure for welcoming foreign tourists, Takenaka said.
Another parliamentary session would be needed this year to pass an extra budget.
Japan’s economy has contracted in four of the 10 quarters under Abe’s administration, with GDP shrinking by an annualized 1.2 percent in the April-June quarter. Almost one-third of economists surveyed by Bloomberg forecast that the central bank will add to its stimulus when it updates estimates for growth and inflation on October 30.
Takenaka said he was “comfortable” with the current level of the yen against the dollar. “Between 115 yen and 120 yen is not a bad line,” he added, expressing an expectation that the level would remain unchanged for some time.
The Japanese currency has fallen about 28 percent since Abe came into office in December 2012. The yen was trading close to 120 against the greenback as of 5 p.m. Tuesday in Tokyo.