Liberal Democratic Party leader Shinzo Abe has indicated he will move swiftly on a large supplementary budget for the current fiscal year if the LDP regains power in the Dec. 16 election and he becomes prime minister.
“The supplementary budget should be large-scale,” Abe said Thursday. “It will be compiled to firmly support the economy.”
On the budget’s size, the former prime minister said he would consider filling the demand-supply gap, indicating it would be in the scale of ¥10 trillion.
Government data released last week showed that total demand in the economy fell short of supply by 3.1 percent, or an annualized ¥15 trillion in the third quarter of 2012.
Abe said the extra budget will be financed mainly by the issuance of “construction bonds,” as it could become an investment in the future, although he declined to say precisely how big the spending package will be.
“I cannot say at this point,” Abe said.
He also warned of severe fiscal consequences if the economy decelerates, because tax revenues would drop, saying, “We should first put priority on preventing such a situation.”
Abe’s party is aiming to win a majority in the Lower House after the Democratic Party of Japan ousted it from power in 2009 and ended more than 50 years of almost uninterrupted LDP rule.
Recent polls have shown the LDP leading the DPJ in voter support, fueling speculation Abe could return as the prime minister — a post he held between 2006 and 2007 until his abrupt resignation.
At a separate event Thursday, Abe urged the Bank of Japan to “think humbly” about the fact that the yen weakened against major currencies after the LDP announced its campaign pledge calling for bold monetary easing.
“The yen declined just because we released our election pledge,” Abe told a gathering in Tokyo. “I would like the BOJ to think humbly about that.”
The remarks are believed to be a rebuke to BOJ Gov. Masaaki Shirakawa, who expressed concern over Abe’s remarks calling for aggressive monetary easing by the bank.
In its platform announced Wednesday, the LDP vowed to set a 2 percent inflation target to prod the BOJ into pursuing more aggressive monetary easing to combat deflation.
The dollar climbed above the ¥82 line Wednesday in Tokyo for the first time in 7½ months amid speculation over further monetary easing by the BOJ.
Shirakawa warned that Abe’s proposals of “unlimited” easing to achieve an annual inflation rate of 2 percent to 3 percent and the BOJ’s purchase of construction bonds from the government to support spending could hurt the independence of the central bank and fiscal discipline.
Abe also said at Thursday’s gathering, “We need to get out of the persistent deflation, correct the yen’s appreciation and strongly boost the economy.”
In the interview, Abe criticized the second economic stimulus package soon to be compiled by Prime Minister Yoshihiko Noda’s government using some of the reserve funds for this fiscal year.
“Now that the Lower House has been dissolved, (the government) should refrain” from action aimed at gaining votes, he said.
On political alignment after the election, Abe stressed he will seek to “create a stable government by allying with various parties depending on policy issues.”
Minor parties have been trying to come together and forge of a so-called third force to take on the LDP and the DPJ in the election. One of the primary movers is Nippon Ishin no Kai (Japan Restoration Party) founded by Osaka Mayor Toru Hashimoto and headed by former Tokyo Gov. Shintaro Ishihara.
Abe also said he will follow through on an agreement made in the summer between the LDP, New Komeito and the DPJ to cooperate on social security and tax reforms, including the sales tax hike the three parties enacted.
LDP goals irk Komeito
New Komeito leader Natsuo Yamaguchi has indicated that his group opposes key campaign pledges by its ally, the Liberal Democratic Party, including a promise to amend the Constitution to clearly state the obvious: that Japan has a military.
For the Dec. 16 House of Representatives election, the LDP has also pledged to allow Japan to exercise the right of collective defense and to revise the Bank of Japan law so the BOJ can boost monetary easing measures. The latter move is seen as an attempt by the LDP to subvert the BOJ’s monetary policy independence.
On the LDP-sought constitutional amendments concerning the Self-Defense Forces, Yamaguchi said Thursday his party currently sees no need to change their long-established name.
He also said the party thinks the BOJ law needs no revision.
The government’s position of not allowing the country to exercise the right of collective defense is reasonable, he said.
Although the two parties aim to win the election and retake power as a coalition government, the LDP could face difficulty achieving some of its goals if New Komeito puts up resistance.