LONDON — Japan got an official go-ahead for its additional stimulus plan at the just-concluded global financial summit in London, as summiteers presented a united front on carrying out stimulus measures to buoy the faltering global economy.
Prime Minister Taro Aso also once again asserted Tokyo’s steadfast position as a generous financial contributor to help embattled developing economies hurt by the current economic crisis. He pledged to boost Japan’s aid for Asian neighbors and bolster support for trade finance.
Although Japan has limited space for ambitious fiscal spending plans as it is saddled with the heaviest debts among rich countries, Aso brushed aside concerns about fiscal sustainability and declared just before his departure for London that Tokyo will compile fresh stimulus steps by the middle of this month.
The fresh economy-boosting steps will come on top of the already implemented spending plans involving fiscal spending of ¥12 trillion, equivalent to 2 percent of the nation’s gross domestic product. Aso said he will “not hesitate to issue deficit-covering bonds.”
After the summit, Aso told reporters that the London gathering “confirmed the need for each nation to implement the maximum measures to revive demand and ensure job security,” including fiscal stimulus steps.
The prime minister said he is seeking to adopt “the largest possible” new economic package under the nation’s current fiscal conditions. Government sources expected that the upcoming economy-boosting steps will involve at least ¥10 trillion in fiscal spending.
Before the summit, Aso preached the necessity of fiscal mobilization in an interview with the Financial Times and criticized Germany for being reluctant to boost stimulus spending.
He reproached the European nation for failing to understand the importance of fiscal mobilization, citing Japan’s experience of overcoming a recession following the burst of its asset-inflated bubble economy in the early 1990s, Japanese officials said.
Critics fear, however, that an aggressive approach could further cripple the nation’s fiscal position. The balance of Japan’s outstanding debts was estimated to reach about 170 percent of its GDP in 2008, according to an Organization for Economic Cooperation and Development survey.
The International Monetary Fund also pointed out in March that among the G20 nations, Japan, Italy and India have “less room to expand spending” as they shoulder “elevated debt levels.”
Some economists blame Japan’s past practice of massive fiscal spending as wasteful pork-barrel policy.
Aso is believed to be keen to boost spending to rescue both Japan’s sinking economy and his sagging popularity. The prime minister has suggested he may dissolve the House of Representatives to call a snap general election in May.
On financial aid for developing economies, Aso pointed proudly to Japan’s record as the first to provide support to help them weather the current financial storm.
The G20 leaders agreed to triple the financial resources of the International Monetary Fund at the London summit so the fund can expand lending to poor nations, with economies including the European Union, China, Canada and Norway offering to provide funds to the Washington-based lender.
Japan announced its $100 billion contribution to the IMF during the previous financial summit in Washington last November and has already signed an official accord with the fund on the deal.
The G20 economies also committed themselves to providing a total of $250 billion in support for trade finance. As part of the grand initiative, Japan increased its existing aid for trade financing to $22 billion.
Aso indicated his satisfaction with the G20 pledge for aid, saying he believes Tokyo “played an important role in formulating a G20 accord” on assistance to poorer nations.
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