Japanese Finance Minister Taro Aso did not rule out the possibility of compiling a supplementary budget at the start of the year beginning in April, suggesting that additional fiscal stimulus could be forthcoming to support an ailing economy.
His remark came as Bank of Japan governor Haruhiko Kuroda said accelerating the pace of money printing alone will not boost expectations of future price rises, acknowledging the limits of what monetary policy can do to revive growth.
“We’ll obviously act flexibly on fiscal policy as needed, looking at how the economy performs,” Aso told parliament yesterday.
“That will depend on economic conditions,” he said, when asked whether the government may consider compiling a supplementary budget early next fiscal year.
The government usually refrains from offering hints of an extra budget until the full budget for the next fiscal year passes through parliament. It is aiming to get a parliament sign-off for the full budget by the end of the current fiscal year in March.
But some ruling party lawmakers have called on premier Shinzo Abe to compile a fresh fiscal stimulus package soon, as the economy skirts with recession on weak consumer spending.
Such calls for fiscal spending may heighten if G20 finance leaders gathering in Shanghai this week agree on the need for major economies to take additional steps to stave off fears of a global recession
Such calls for fiscal spending may heighten if G20 finance leaders gathering in Shanghai this week agree on the need for major economies to take additional steps to stave off fears of a global recession.
A senior US Treasury official said Washington will call on G20 countries this week to use fiscal policy to boost global demand.
Hopes for additional fiscal spending loom even as Japan is struggling to rein in a public debt that is the biggest among major industrialised economies.
The BOJ’s decision last month to add negative interest rates to its aggressive asset-buying programme has done little to arrest a damaging yen rise or brighten business sentiment.
Kuroda said expanding base money will not immediately boost prices towards the BOJ’s two per cent target but would help stimulate the economy by pushing down real borrowing costs.
“The main transmission channel of our current quantitative and qualitative easing [QQE] policy with negative interest rates on the economy is through declines in real interest rates,” Kuroda told the same parliament session.
Aso also said aggressive money printing alone will not work because companies are wary of borrowing from banks, instead preferring to use their own cash-pile for capital spending.