New economic ministers seek stimulus policy, fiscal health+

TOKYO, Sept. 24 Kyodo -
(EDS: ADDING BACKGROUND, ECONOMIST'S COMMENTS)
Economic ministers of the new Cabinet under Prime Minister Taro Aso stressed
Wednesday that they will pursue measures both to shore up the flagging economy
and reconstruct the nation's fiscal health, in a bid to dispel concern about a
possible split in their standpoints.
Economic and Fiscal Policy Minister Kaoru Yosano, who is known as a keen
advocate of fiscal rehabilitation, and Shoichi Nakagawa, who will concurrently
serve as finance and financial services minister, and is seeking fiscal
spending for necessary areas, indicated that their stances are not so
different.
''Prime Minister Aso says when we carry out fiscal reforms, we should not fail
to consider economic conditions at the time,'' Yosano said at a press
conference after retaining his ministerial post.
''I do not oppose the view that the government should care about people's
living conditions when it implements comprehensive reforms on tax and fiscal
spending,'' he said.
Nakagawa said at his inaugural news conference, ''Improving fiscal health is
the consensus of the Japanese people and I believe steps to rejuvenate the
nation's economy would not contradict that policy.''
The two ministers said they retain the government's goal of realizing a primary
balance surplus in fiscal 2011. But Nakagawa added that his first priority will
be stimulating the economy.
''I haven't ditched the fiscal 2011 target and want to achieve it at any rate.
To that end, I want the economy to recover and that is my first priority,''
Nakagawa said, indicating that he believes fiscal reconstruction will become
achievable once the government successfully boosts the economy.
A primary balance surplus will be achieved when outlays other than
debt-servicing costs are covered by revenues without relying on fresh debt
issuance.
Japan's long-term debt is expected to reach 148 percent of the country's gross
domestic product on March 31, 2009, at the national and local government
levels. The nation's debt-to-GDP ratio is already the worst among developed
countries.
Nakagawa also said the Aso Cabinet will strive to swiftly enact a 1.81 trillion
yen supplementary budget for the current fiscal year, which is part of an 11.7
trillion yen emergency policy package designed to ease the negative impact on
the Japanese economy from spikes in energy and raw material costs.
The minister even suggested that the government will consider additional fiscal
outlays, if necessary, to support the weakening economy.
On the ongoing global financial turmoil, Nakagawa emphasized the importance of
responding ''speedily, flexibly and effectively'' to the unfolding crisis.
Private-sector economists generally welcomed Aso's decision to retain Yosano as
fiscal policy minister because it symbolizes convergence in his Cabinet's
economic policy. The premier himself has been viewed as a fiscal expansionist.
''With the presence of Mr. Yosano, the Aso Cabinet gives the impression that it
will not solely adopt an aggressive fiscal policy. He is expected to serve as
an inhibitor'' of fiscal expansionism, said Hideo Kumano, chief economist at
the Dai-ichi Life Research Institute.
Kyohei Morita, chief economist at Barclays Capital Japan Ltd., said Yosano will
assuage concerns among market players about the country's fiscal outlook and
help prevent long-term interest rates from escalating.
Morita also lauded the premier's assignment for Nakagawa, saying that at a time
of global financial meltdown, it is suitable for one person to concurrently
serve as finance and financial services minister.
''The financial services minister cannot represent Japan at a G-7 meeting and
the finance minister cannot engage in financial administration. In a crisis,
authorities need to coordinate policies globally and I believe this assignment
is positive,'' Morita said.
The Group of Seven major economies are Britain, Canada, France, Germany, Italy,
Japan and the United States. G-7 finance ministers and central bankers meet
regularly to examine global economic conditions.
In Japan, the authority to supervise the finance industry was separated from
the finance ministry in 1998, following a scandal involving excessive wining
and dining of ministry inspectors by financial institutions.
Prior to Nakagawa, no finance minister has doubled as the financial services
minister, who heads the Financial Services Agency.