Private-sector members of the Council on Economic and Fiscal Policy on Thursday called for potential stimulus measures to be studied to address downside risks to the global economy.
The government “needs to flexibly respond if judged necessary” after Japan’s gross domestic product turned “weak” in the October-December quarter as emerging markets slowed and oil prices slid, the members of the key government panel said.
The proposal made by the council’s academic and business members came after government data showed the economy shrank at an annualized real 1.4 percent pace in the final quarter of 2015, following an expansion the previous quarter. The contraction was blamed on weak consumer spending amid an unusually warm winter and sluggish exports.
To stabilize global financial markets, the private-sector members called for the reinforcement of cooperation between countries belonging to such international frameworks as the Group of Seven industrialized nations.
“We will steadily continue to monitor developments in the global economy and markets, and deepen international cooperation with G-7 countries to pursue further global growth and market stability,” Prime Minister Shinzo Abe told the council Thursday.
Japan will host the G-7 summit in late May, as well as a series of ministerial meetings in the country including a finance ministers’ gathering in April.
To expand consumer spending, Abe urged companies that are logging higher profits to raise wages beyond the previous year’s level, as the annual spring wage negotiations are now in full swing.
As for the impact of the negative interest rate policy adopted last month by the Bank of Japan, Abe said he expects the measure to help expand personal consumption and business investment by lowering mortgage rates and corporate lending rates.
To lift Japan’s GDP by around 20 percent from the current level to ¥600 trillion ($5.3 trillion) by around 2020 as pledged by Abe, the private-sector members urged the government to raise minimum pay and carry out measures to expand spending by foreign tourists.
“In order to realize the ¥600 trillion economy, it is extremely important to stir new demand,” Abe said.