Financial markets and people appear to hope that the economic policy to be adopted by the incoming administration of Liberal Democratic Party chief Shinzo Abe will improve the Japanese economy. Clearly people want deflation to end, the economy to pick up and the reconstruction from the effects of the 3/11 disasters to accelerate.
But Mr. Abe's economic policy must be scrutinized closely because it could cause undesirable side effects.
Mr. Abe calls for compilation of a large-scale supplementary budget as well as bold monetary easing by the Bank of Japan. Specifically, the LDP government is expected to submit a ¥10 trillion supplementary budget to the Diet in January, and Mr. Abe has asked BOJ Gov. Masaaki Shirakawa to set a 2 percent inflation target. The LDP proposes spending ¥200 trillion over 10 years on public works projects in the name of making the nation resilient to natural disasters.