Although Japan needs to get its fiscal house in order, it should also focus on boosting economic growth by fostering new markets and cutting red tape, top government officials and economists said at an economic forum in Tokyo on Monday.
“The Japanese economy still has a lot of potential, so it is a matter of course that we (should) aim for economic growth,” said Senior Vice Finance Minister Yoshihiko Noda at the government’s Ninth Business Round Table.
That growth should be sustainable and balance foreign and domestic demand, Noda said during a panel discussion, adding that the government will put together a midterm plan for fiscal reconstruction and economic growth by spring.
Masayuki Kichikawa, chief economist at Merrill Lynch Japan Securities Co., pointed out that Japan’s average rate of economic growth from 2001 to 2008 was an anemic 0.1 percent before adjusting for changes in prices, considerably lower than other developed nations.
He said that although Japan’s budget deficit is massive, it is not at the stage where it could cause a global crisis, so the government should focus more on stimulating the economy over the next few years.
Still, Kohei Otsuka, senior vice financial services minister, stressed the government can’t neglect its balance sheet, noting that the International Monetary Fund said in July that the country’s public debts will exceed public assets in 2019 on current trends.
“Our government is facing a very difficult situation where we have to balance . . . growth and fiscal reconstruction,” said Otsuka, adding that Japan needs to come up with unconventional fiscal and credit policies to deal with the problem.
Otsuka said the government aims to raise the real (inflation-adjusted) economic growth rate, which is currently positive. The economy grew at a 4.8 percent annual pace in the July-September quarter, according to the government.
The participants agreed that Japan should aim to create new markets and stimulate demand to boost economic growth.
Yuko Kawamoto, a professor at Waseda University’s Graduate School of Finance, said many regulations inhibit the development of new markets.
She pointed out that 1 million children are on waiting lists for kindergartens and day care facilities. This is a big business opportunity, but legal restrictions make it hard for the private sector to meet this demand, Kawamoto said.