News Column

Aso vows to restore "strong economy" to boost government revenues

January 23, 2014

TOKYO , Jan. 24 -- ( Kyodo ) _ Finance Minister Taro Aso pledged Friday to restore a "strong economy" through the creation of a "virtuous economic cycle," emphasizing it would help boost government revenues and put Japan's debt-ridden fiscal house back in order. Aso also promised in a speech to parliament to work to "build a sustainable social security system" by raising the sales tax rate and take necessary steps to prevent the tax hike from hurting the economy that is on the verge of beating nearly two decades of deflation. To bolster the nascent economic recovery, "it is important to realize a virtuous economic cycle," in which expansion in corporate earnings leads to wage and employment growth, resulting in greater consumer spending and investment as the cycle repeats, Aso said. "We will try to restore a strong economy -- a foundation for tax and premiums revenues. In addition, we will build a sustainable social security system and pass it on to the next generation, while ensuring stable financial resources for social security programs by increasing the sales tax rate," he said. Amid growing fears that the economy will weaken following the planned 3-percentage-point sales tax hike to 8 percent in April, Aso said the government will "address the downside risks" and "implement measures to bring about sustainable economic growth." As for public finances, Aso reiterated his eagerness to attain the government's fiscal consolidation goal of halving the ratio of the primary balance deficit to the country's gross domestic product by fiscal 2015 from the fiscal 2010 level and turning the balance into a surplus by fiscal 2020. Japan's fiscal health is the worst among major developed economies with public debt equivalent to more than 200 percent of GDP. The nation's central government debt topped 1,000 trillion yen for the first time ever last year. The country's fiscal condition is "extremely severe," Aso said, adding, "We have to eliminate public concern about the future by securing confidence in fiscal policy" to achieve economic growth. His remarks came after Prime Minister Shinzo Abe's Cabinet submitted to the Diet earlier Friday a 5.5 trillion yen supplementary budget for this fiscal year and a record-high 95.9 trillion yen general-account budget for fiscal 2014 starting April. The total 100 trillion yen budget is aimed mainly at avoiding a sharp economic downturn in the wake of the sales tax hike and prompting infrastructure investment ahead of the 2020 Tokyo Olympics. "Swift passage of these budgets is necessary to ensure a path toward the end of deflation and economic revitalization," Aso said, urging lawmakers to pass them as soon as possible. In a separate speech to parliament Friday, economic and fiscal policy minister Akira Amari said the government will "strongly push ahead with" its economic growth strategy mapped out in June last year. Vowing to reform sectors such as agriculture and health care, which are widely seen as being protected from competition by stringent regulations, Amari said Abe's administration will revise the strategy around June this year. The economic growth strategy is the "third arrow" of the premier's policies dubbed "Abenomics," along with drastic monetary easing by the Bank of Japan and massive public spending. Amari, doubling as minister in charge of the ongoing Trans-Pacific Partnership free trade talks, also committed to "making efforts toward an early conclusion" of the tariff-cutting TPP together with other negotiating members. Japan will "continue to fully engage in the negotiations to make sure national interests will be reflected in the final results," Amari said. Amari added Japan's economy "has been steadily stepping toward the end of deflation." On Friday, the Cabinet approved the government's economic growth forecasts, in which it expects the world's third-biggest economy to grow 1.4 percent in real terms and 3.3 percent in nominal terms in the next fiscal year. (Kayo Mimizuka contributed to this report.)

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Source: Japan Economic Newswire

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