New economic and fiscal policy minister Banri Kaieda is suggesting construction bonds might be issued to finance an extra budget if the money can be used on "efficient" public works projects.
The projects could be seen as "effective economic steps," Kaieda said in a group interview with media organizations Monday. "We will count the idea in."
The remark raised eyebrows because Prime Minister Naoto Kan is trying to avoid issuing new bonds to keep a lid on government debt.
"If the government can eventually cap the amount of fresh government bond issuance below ¥44 trillion for fiscal 2011 (as promised in the fiscal plan released in June), it is not contradictory," he said. "There are various pathways for fiscal consolidation."
Fiscally conservative Kan said last week that he will examine how the government can remedy the stagnant economy "without issuing bonds."
On Monday, the former finance minister told his Cabinet to formulate a supplementary budget for fiscal 2010 to fund steps to fight deflation and the surging yen. The extra budget is expected to be as large as ¥4.6 trillion.
Kaieda, who entered the Cabinet in Kan's reshuffle earlier this month, said even though the economy remains on a steady recovery track, "we should steer the economy, recognizing it has entered a lull."
"We enjoyed relatively favorable economic conditions from July through September thanks to scorching hot days," he said. "But the problem lies in the months ahead and we cannot be optimistic."
On the controversial interest-free government bonds he has advocated, Kaieda said he will set up a study group in the Cabinet Office to examine the issue.
"It's not strange for us to study ways to take advantage of state assets as financial resources," he said, countering the argument that such bonds would provide preferential benefits to wealthy people.
