‘Nation-toughening’ projects lauded

JIJI

Kyoto University professor Satoshi Fujii, an adviser to Prime Minister Shinzo Abe on disaster prevention and reduction, emphasized the need to build up the nation’s infrastructure, lauding a ¥20.2 trillion economic package featuring public works that the government has recently adopted.

The well-known advocate of “nation-toughening” said in a recent interview “Japan faces the risk of megaquakes. A strong eaquake just below Tokyo could destroy the heart of this country. We should be fully prepared.”

Fujii said his proposed nation-toughening program, involving expanded fiscal spending on infrastructure projects, will help boost the economy and also help pull the country out of a decade-long period of deflation.

The program has two pillars: sufficient investment in projects to boost the seismic capacity of buildings and construct tsunami walls around ports and exposed coastal areas, and the decentralization of Tokyo’s capital functions through infrastructure development in the countryside, he said.

“The necessary costs would be estimated by the government, but in my opinion, the national and local governments would need to invest a total of ¥100 trillion to ¥200 trillion,” Fujii said, adding, “This program will be the last piece of ‘Abenomics’ ” or Abe’s policy of aggressively promoting monetary and fiscal stimulus.

Abe’s government finalized a new economic stimulus package last week, less than three weeks after it came to power in late December. The package involves ¥10.3 trillion in fiscal spending, including ¥5.2 trillion on public works projects.

“The spending is not much,” Fujii said. But given the short period of time for the Abe government to draw up the package, “It’s the best possible outcome,” he added.

He downplayed concerns that the program will further boost government debt and result in a spike in interest rates.

With slow fund demand, Fujii said, banks have strong incentives to buy Japanese government bonds. Many are concerned that inflation will lead to higher interest rates, but it is implausible to believe institutional investors will move to dump JGBs bought as a safe-haven asset, Fujii said.

If interest rates start to show any sign of rising, the Bank of Japan should buy JGBs to rein them in, he said.