Amid signs of trouble, Abe rules out stimulus for now

 

TOKYO — Despite signals that the Japanese economy is flagging, Prime Minister Shinzo Abe intends to keep pump-priming measures off the table for the time being to focus on swift passage of the fiscal 2016 budget.

     That strategy was confirmed when Abe met with Natsuo Yamaguchi, head of junior coalition partner Komeito, at the prime minister’s office on Wednesday. "Let’s focus on passage of the budget before the end of the current fiscal year," Abe told Yamaguchi, adding that Japan will "deepen international collaboration" through the upcoming meeting of Group of 20 finance ministers and central bank chiefs and the Group of Seven summit.

     The appreciation of the yen and a stock market slump, in addition to preliminary data showing negative GDP growth for the October-December quarter, are raising concerns about the economy. But Abe argues that the current market turmoil has been caused by external factors.

     "Overseas factors are to blame, including concerns of a Chinese economic slowdown, the drop in crude prices and the U.S. interest rate hike," Abe told the Diet on Monday. "Japan’s economic fundamentals are solid."

     The Diet is currently deliberating the fiscal 2016 draft budget. Should the ruling coalition hint at the possibility of stimulus spending before that budget is passed, the opposition parties could call for a revision of the budget proposal, delaying deliberations. A senior bureaucrat also notes that fiscal stimulus could be taken as a sign that Abenomics has failed.

     The ruling coalition aims to get the budget approved in the lower house on Feb. 29. If the budget is sent to the upper house the same day, it will pass automatically on March 29 under a constitutional rule even if the upper house does not vote on it.

     Once the budget is passed, the central government will press local governments to quickly execute economic programs prescribed in the budget. The ruling coalition hopes to sustain market expectations by drawing up in May a growth plan touting "participation by the entire population" and hammering out fresh stimulus measures ahead of this summer’s upper house election.

     Still, the government and ruling coalition will leave open the possibility of fiscal spending if conditions deteriorate. Nongovernment members of the Council on Economic and Fiscal Policy are expected to recommend at Thursday’s meeting that the government act flexibly when necessary.

(Nikkei)