The government should decide on a supplementary budget within a month or two, a veteran politician and economic adviser to Prime Minister Keizo Obuchi said Wednesday.
Ichizo Ohara, a member of the ruling Liberal Democratic Party and a former agriculture minister, said that’s how long it will take to make sure long-term interest rates won’t rise if an extra budget is announced. A rise in long-term rates could cause stocks to crash, which would endanger banks and other publicly held firms.
“I think the time is coming (for the government) to decide on the scale and contents of a supplementary budget, if long-term interest rates do not rise when government bonds worth 3 trillion yen are being issued every month,” Ohara told a luncheon at the Foreign Correspondents’ Club of Japan in Tokyo.
Ohara chairs several LDP economic committees. His proposals led to the establishment of the Economic Strategy Council and the Competitiveness Commission, both of which advise the prime minister.
Market players have been wondering whether the government will prepare a supplementary budget to keep the ailing economy on the recovery track.
Pressure to do so may be building, considering Obuchi’s pledge to achieve 0.5 percent growth in fiscal 1999, which ends in March 2000.
Even so, many private economists remain skeptical that goal will be achieved, partly because they believe the effects of huge public works spending financed by the current budget will fade out later this year.
Ohara said, without naming the prime minister: “Where in the world is there a politician stupid enough to pledge (a growth target)? No one, including Christ and Buddha, has correctly forecast a national economy.”
Ohara said he made the remarks in a meeting with Taichi Sakaiya, head of the Economic Planning Agency, prior to Obuchi’s trip to the United States to meet President Bill Clinton in early May.
Ohara quoted Sakaiya as responding that the 0.5 percent target would not be achieved without a supplementary budget.
Ohara noted that any extra spending this fiscal year would be used for job-creation measures and public investment.
Ohara did not make any reference to a two-stage extra budget compilation idea circulating among the LDP and the government.