Prime Minister Shinzo Abe’s administration will take “drastic” measures to revitalize the economy, Finance Minister Taro Aso pledged Thursday, suggesting that previous policies had been insufficient to beat back more than a decade of deflation.
“Deflation is a deep-rooted problem that has undermined the Japanese economy” because it has “hampered investment toward the future,” Aso said in a speech to the Lower House.
To jack up the economy, he said the administration will push through what Abe calls his “three arrows” of flexible fiscal spending, aggressive monetary easing and growth strategies.
He added that the administration’s economic policies, dubbed “Abenomics,” aimed at preventing declining prices have drawn global attention, given that Japan has undergone the most pronounced period of deflation by a major developed economy since World War II.
“As a pioneer, Japan should achieve the end of deflationary recession and present a solution to the world,” he told the Lower House.
Turning to the current situation, Aso said the economy “has shown positive signs” of picking up, given that stock prices have rebounded.
Aiming to ensure a recovery, Aso called for swift passage of a record ¥92.61 trillion initial budget for fiscal 2013, which Abe’s Cabinet submitted to the Diet earlier in the day.
On Tuesday, the Diet enacted a ¥13.1 trillion supplementary budget for fiscal 2012 to finance a stimulus package centered on big public works projects.
With the two budgets covering financing needs for a total of 15 months, the administration will implement economic steps in a seamless manner, Aso said.
The government now expects the economy to grow 2.5 percent in real terms and 2.7 percent in nominal terms in fiscal 2013, predicting the new stimulus package will spur domestic demand and that the global economy will rebound.
Amid growing concern over the fiscal health of the world’s third-biggest economy, already the worst among developed countries, Aso said, “It is important to maintain trust in Japan’s fiscal policy.”
Aso touched on the need to achieve the government’s goal of halving the ratio of the deficit in the primary balance to gross domestic product by fiscal 2015 from the level in fiscal 2010 and turning it into a surplus by fiscal 2020.
“We’ll consider a path to simultaneously achieve fiscal rehabilitation and Japan’s economic revival,” Aso said.
The economy shrank an annualized real 0.4 percent in October-December for the third straight quarterly contraction on tepid exports and capital spending.
In a separate speech Thursday, economic revitalization minister Akira Amari said aggressive monetary easing by the Bank of Japan is “vital” to get the economy on a sustainable recovery track.
The government hopes the BOJ “will promote bold monetary easing” to attain as soon as possible the 2 percent inflation target set in January, Amari said.
He promised to carry out growth strategies in a steady manner, putting emphasis on restoring Japan’s international competitiveness and reinforcing its innovation capacity.
He said the Abe government, formed Dec. 26, is scheduled to finalize the strategies by the middle of this year.