Abe’s Enforcer Rules Out Deficit Bonds to Fund Stimulus Package

  • BOJ still has easing options, Suga says in interview
  • Suga wants to pass TPP in next Diet session, won’t renegotiate

Yoshihide Suga.

Photographer: Kiyoshi Ota/Bloomberg

Japan’s top government spokesman ruled out the issuance of deficit bonds to fund an economic stimulus package planned for the autumn, hinting at the use of construction bonds for longer-term investments.

Abenomics

“We want to make full use of every possible resource, including for financing, to make it robust,” Chief Cabinet Secretary Yoshihide Suga said in an interview Saturday at his offices in Tokyo. “I want to make it clear that we are not planning to issue” deficit bonds, the 67-year-old said.

In his first speech after winning an upper house election on July 10, Prime Minister Shinzo Abe outlined plans for a “bold” stimulus package. He said it would include funds for regional infrastructure, such as bringing forward the construction of maglev and other high-speed train lines and improving facilities at ports for tourist cruise ships.

Taking on more debt to fund the package, which is expected to amount to about 10 trillion yen ($95 billion), might raise concerns about how the world’s most indebted nation will achieve its aim of wiping out the budget shortfall in the next few years. Speculation about the stimulus plan and so-called helicopter money led the yen to weaken last week.

The chief cabinet secretary serves as the public face of the government, with a daily schedule that typically includes two press briefings. Suga runs the Cabinet Secretariat, which coordinates between the various ministries and agencies, and serves on panels such as the national security council and the government’s top economic committee. He also plays the role of Abe’s enforcer, imposing discipline in the cabinet.

BOJ Stimulus

Influential Abe advisers have called for a boost in monetary stimulus coordinated with the fiscal package. Suga echoed comments made by former Federal Reserve Chairman Ben S. Bernanke during a visit to Tokyo last week, in saying that the Bank of Japan still has options for further easing its already unprecedented monetary stimulus.

While Suga declined to specify what the options might be, Etsuro Honda, who helped the prime minister shape his Abenomics policy program, said last week that the central bank should accelerate its government bond purchases rather than deepen negative interest rates. Honda advocated action at the BOJ’s July 28-29 policy meeting.

Asked about further use of negative rates, which have sparked unease among markets and consumers, Suga said: “I believe they are effective, but they haven’t been explained sufficiently to the public and to the financial sector.”

For an explainer of negative rates, click here.

Trade Deal

After taking office in late 2012, Abe announced a three-pronged economic program of monetary easing, fiscal stimulus and deregulation to spur competitiveness in the world’s third-largest economy. On the third pillar, Suga said parliament should approve a 12-nation regional trade deal in its next session expected in the autumn. The Trans-Pacific Partnership has faced roadblocks in the U.S., but Suga said there was no prospect of renegotiating the deal.

“That’s absolutely impossible,” he said. “The countries involved went through a complex process to reach this agreement, so we want to go ahead with it as we promised.”

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE