WASHINGTON – Finance Minister Taro Aso said Friday that Japan’s efforts to boost the economy and restore its precarious fiscal health were welcomed at a two-day meeting of the Group of 20 finance chiefs in Washington.
Aso said he explained to his G-20 counterparts that Japan raised its consumption tax rate for the first time in 17 years to cover swelling social security costs for the graying population and has taken necessary steps to ease the negative impact of its first stage.
“Japan’s attempt to simultaneously achieve economic growth and fiscal rehabilitation was appreciated,” Aso said at a joint press conference with Bank of Japan Gov. Haruhiko Kuroda after the G-20 gathering was wrapped up.
Aso also pledged that the government will speed up its work to map out a revised economic strategy, slated to be unveiled in June, as the G-20 members confirmed in Washington that they will review their “comprehensive growth strategies” when their finance chiefs next meet in September.
Recently, some countries have become skeptical about the effectiveness of Japan’s current growth strategy, dubbed “Abenomics.” Prime Minister Shinzo Abe describes his economic plan as having three arrows — aggressive monetary easing, massive fiscal spending — which have been fired — and the elusive third arrow of structural reform.
U.S. Treasury Secretary Jack Lew said at a separate news conference later Friday that he called on Aso during their bilateral talks the previous day to craft a strategy aimed at carrying out drastic structural reforms and deregulation.
“I know that the Japanese government is still working on that. We certainly hope that they will be able to reach a favorable conclusion,” Lew said.
“The first two arrows have worked to reverse the almost two decades of economic decline and deflation,” Lew added.
Indeed, Kuroda said at the joint press conference that he told the G-20 finance ministers and central bank governors that the world’s third-biggest economy has been following a path toward attaining the bank’s 2 percent inflation target.
Despite his confidence, fears are lingering that the consumption tax hike would hurt the nascent economic recovery.
“We are ready to adjust monetary policies without hesitation if necessary,” Kuroda said, suggesting the BOJ will take additional easing measures if Japan’s economy threatens to take a sharp downturn in its wake.
Aso, meanwhile, expressed concern that the escalating tensions in Ukraine, triggered by Russia’s annexation of the Crimean Peninsula last month, will cast a shadow over the outlook for the global economy and in turn Japan’s.
“I spoke about how important it is for the G-20 to work together closely to decrease geopolitical uncertainties,” Aso said.
When asked about how Japan will respond if the United States imposes additional sanctions on Russia for violating its neighbor’s sovereignty, Aso said Japan will decide while monitoring the movements of Europe.
In a communique released Friday, the world’s leading economies, including Russia, said, “We are monitoring the economic situation in Ukraine, mindful of any risks to economic and financial stability.”
G-20 finance ministers and central bank chiefs pledged to follow up on reforms and support a $27 billion rescue program for Ukraine, even as Russia continues to menace its neighbor.
But there was little firm action on how to stimulate world growth further, prompting Australia’s Treasurer Joe Hockey, whose country leads the G-20 this year, to label the sketchy plans “clearly inadequate.”
The G-20 reiterated last year’s promise to boost collective growth by 2 points, but there was disagreement on how to do so.