Keidanren recommends putting fiscal reform before stimulus

The new government should tackle fiscal consolidation instead of focusing on economic stimulus measures, the head of Japan’s leading business association said Monday.

Takashi Imai, chairman of the Japan Federation of Economic Organizations (Keidanren), told a news conference, “As the economy is beginning to get on the right track, we would like the new Cabinet to address structural fiscal reforms, including the issues of costs and benefits, by presenting a grand design encompassing taxation, social security and local-government finances.”

On monetary policy, Imai said: “Now is not the time to raise interest rates. It is too early to do away with the (current) zero interest rate policy.”

He added that the new government of Prime Minister Yoshiro Mori, who was inaugurated Wednesday, need not consider a major supplementary budget for fiscal 2000 if the economy shows positive growth for the two quarters through June.

On the exchange rate, Imai said the current rate is at “an acceptable level.” At a meeting of central bankers and finance ministers of the Group of Seven nations to be held during weekend in Washington, Imai wants the Japanese government to expressly state that no further gain in the yen is desirable.

The U.S. dollar was quoted at 106.05-08 yen in Tokyo late Monday afternoon, up from 105.35-45 yen late Friday in New York.