Aide to Japan’s Premier Says Stimulus Must Be Considered Soon
Aide to Japan’s Premier Says Stimulus Must Be Considered Soon
(Bloomberg) -- Japan must swiftly consider economic stimulus measures amid rising prices, and will eventually need an extra budget, a close aide to Prime Minister Fumio Kishida said.
“If you look at the Japanese economy, the surge in oil prices and food prices means that an economic package is essential at some point,” Deputy Chief Cabinet Secretary Seiji Kihara said in an interview with Bloomberg at the premier’s official residence Friday. “We can’t be slow. To be honest we have to think about it quickly.”
He added an extra budget would be needed, but that now was not the time. A majority of economists surveyed by Bloomberg expect Japan’s economy to shrink this quarter, as virus curbs and higher energy prices caused partly by the war in Ukraine hit consumers. The growing likelihood the economy may slip into reverse could amplify calls for more government stimulus.
Most Analysts Now See Japan’s Economy Shrinking This Quarter
Kishida told a news conference Wednesday the government would respond nimbly if rises in food, fuel and raw material prices persist for a long period.
Japan’s parliament is close to approving a record initial budget of 107.5 trillion yen ($902 billion) for the fiscal year starting in April. One adviser to the premier has called for $86 billion in annual spending on infrastructure to help the already heavily indebted country generate extra demand in the economy.
Describing Kishida as “very knowledgeable” about finance, Kihara also said the administration wanted to maintain the economic policies laid out under former Prime Minister Shinzo Abe, especially the 2% inflation target. “That’s the most basic of the basics,” he said.
Kihara, a former Finance Ministry bureaucrat known for his close ties to Kishida, tempered some of the ideas his boss has floated about financial regulation. He said the premier would “absolutely” not limit share buy-backs and would not insist on ending the requirement for companies to publish quarterly financial reports for its own sake.
“He wants a system where management doesn’t become too short-termist, and a long-term perspective can be taken,” Kihara said. “If that means abolishing it, then so be it, but if there is another way, that would be better.”
Kishida came to office in October criticizing income disparities and saying his predecessors’ reliance on markets had brought problems alongside economic growth. He pledged to create a “virtuous cycle” by raising wages to bolster consumption in a plan he dubbed “new capitalism.”
Some of Kishida’s suggestions, including raising tax on financial capital gains, drawing up guidelines on share buy-backs and ending the requirement for quarterly reporting have been blamed for sending a chill through financial markets.
In a Dec. 14 budget committee session, Kishida’s reference to possible guidelines for corporate share buybacks prompted the blue-chip Nikkei 225 Stock Average to briefly dip 1.2%.
Kihara said Kishida would consult market participants, including foreign investors, on quarterly reporting before making decisions, saying there had been misunderstandings over his plans and that voices from the market would be treated with the “utmost respect.”
“The prime minister is not the type to decide everything on his own,” Kihara said. “He listens to opinions and explores what is best.”
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