Japan lacks effective fiscal and monetary policy tools to protect its economy from the impact of the U.S.-led military strikes in Afghanistan, economists say.
The government has been hinting it could scrap its 30 trillion yen cap on fiscal 2001 bond issues to rev up the economy, but additional deficit spending on the order of several trillion yen won't make much of a difference anyway, they say.
Despite Prime Minister Junichiro Koizumi's promise to limit bond issuances to within 30 trillion yen, he has recently expressed readiness to overstep the boundary if economic woes require a "bold and flexible" policy response.