Growth must replace public stimulus, Shinzo Abe says
PM promises revival of Japanese economy amid growing concerns over reliance on borrowing
Japanese Prime Minister Shinzo Abe pledged yesterday he would not keep stimulus spending "forever" in a policy speech ahead of a budget that will raise more from taxes than borrowing.
For the past four years, the majority of money spent by the government has been raised by selling bonds.
Abe announced the shift in a policy speech on the same day that an opinion poll showed a boost in his popularity since he came to power last month.
"We can't continue fiscal spending forever," he said at the opening of parliament. "We will draw up and implement a growth strategy that will see private investment and consumption grow sustainably.
"The greatest and most urgent challenge for our country is revival of the economy. We can't exit from deflation and from a high yen by keeping the past measures. Therefore I present a bold policy package."
The policy speech comes after his government announced a US$226.5 billion stimulus package earlier this month, raising concerns over the level of Japan's already-towering public debt.
In his first policy speech since taking office in December, Abe repeated his "three arrows" of economy policy: aggressive monetary easing, flexible fiscal spending and a growth strategy to spur private investment.
Japan's budget for the fiscal year starting in April would likely total 92.61 trillion yen (HK$7.9 trillion), with revenue estimated at 43.10 trillion yen and new bond issuance at 42.85 trillion yen - the first time in four years revenue surpasses new bond issuance.
Under the budget plan, spending on defence would increase by 40 billion yen, the first rise in 11 years, which comes against the backdrop of a lingering territorial row with China over the sovereignty of a chain of islands in the East China Sea.
Abe made no mention of election promises to amend the US-imposed pacifist constitution and review the restrictive policy on collective self-defence - largely interpreted as its right to fire back if US forces in Japan are attacked.
Pundits expect these issues to be left on the back burner until upper house elections due later this year, which Abe's Liberal Democratic Party needs to win if it is to have the power to drive through some of the controversial changes he has talked about.
A survey published yesterday by the business daily Nikkei showed public support for Abe rose by six percentage points to 68 per cent from late last month, just days after Abe's cabinet was launched.
As well as broad approval of economic measures, the survey showed a majority of voters liked Abe's response to the Algerian hostage crisis in which 10 Japanese people died.
Abe returned home early from a foreign trip to deal with the crisis, which also saw his government call in the Algerian ambassador to demand answers.