• Bloomberg


While saying it is best if such a move is not made, Finance Minister Taro Aso refused to rule out the possibility an extra budget will be needed again next year to support the economy.

“My honest feeling is that it would be best if we don’t have to do it, but I won’t say there’s no possibility,” Aso said in an interview with NHK that ran Sunday. “We can’t say whether we can avoid it until we see figures from the July-September period.”

Extra spending next year will risk expanding the country’s public debt, which, at more than twice the size of annual economic output, is the world’s heaviest. The government this month unveiled a record budget plan for the fiscal year starting April 1, when a sales tax increase is forecast by analysts to cause the economy to shrink in the second quarter.

“The sales tax hike will have a sizable harmful effect on the economy,” said Yasuhide Yajima, the chief economist at NLI Research Institute in Tokyo. For Prime Minister Shinzo Abe, “it’s vital to keep expectations buoyant. He can’t afford to just deliver negative news to the public while trying to end deflation.”

Ministers and the ruling coalition compiled the ¥95.8 trillion budget proposal for the next fiscal year on Dec. 21.

Japan’s public debt has ballooned to more than ¥1 quadrillion and is expected by the International Monetary Fund to grow to the equivalent of 244 percent of gross domestic product in 2013.

According to the median estimate of economists surveyed by Bloomberg News, the nation’s economy will contract by an annualized 3.9 percent in the three months after the consumption tax rate increases to 8 percent from 5 percent on April 1.

GDP will probably grow 1.8 percent in the following quarter, and expand 1.6 percent for all of 2014, the polls show.

Abe said the government will decide whether to further boost the sales tax as planned in 2015 after studying data for the July-September quarter. He came to power last December pledging to use stimulus to overcome 15 years of price declines in the world’s third-largest economy.


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