© Reuters. FILE PHOTO: Japan’s Minister of State in charge of revitalizing local economies, Kozo Yamamoto, speaks in Tokyo, Japan on August 3, 2016. REUTERS / Kim Kyung-Hoon
By Leika Kihara and Takaya Yamaguchi
TOKYO (Reuters) – Japan should compile an economic stimulus package worth at least 32-33 trillion yen ($ 282- $ 290 billion) to cushion the impact of the coronavirus pandemic, a senior party official said. ruler close to Prime Minister Fumio Kishida on Thursday.
Such large-scale spending would be necessary to fill Japan’s output gap and achieve the central bank’s 2% inflation target, said Kozo Yamamoto, architect of former Prime Minister Shinzo Abe’s “Abenomics” stimulus policies.
“The package can be financed by issuing Japanese government bonds (JGB),” said Yamamoto, now Kishida’s partner in economic policy. “The government should issue massive amounts of long-term JGB, which the central bank can buy aggressively.”
A former Finance Ministry official, Yamamoto has been deeply involved in the creation of Abenomics, a combination of massive fiscal and monetary stimulus and a growth strategy implemented in 2013 to lift Japan out of economic stagnation.
Kishida has said that he will maintain Abenomics’ stimulus policies and take additional steps to distribute wealth more broadly to households. The prime minister has also promised to compile a spending package worth “several tens of trillions of yen.”
“The important thing above all is to achieve strong economic growth with the three Abenomics arrows. Only then can we talk about redistribution, ”Yamamoto said, adding that he frequently exchanges emails with Kishida.
Although Japan should eventually raise taxes on capital gains and dividends to narrow the income gap, it will take at least until fiscal 2023 to establish the details, Yamamoto said.
Yamamoto, who has spearheaded the party’s proposals on financial matters, reiterated the need for Japan to act quickly to issue a central bank digital currency (CBDC).
That would require revising the law governing the Bank of Japan (BOJ), which would create an opportunity for other changes, such as adding job creation to the central bank’s mandate, he said.
“We need to hold the BOJ accountable for both price stability and job creation,” Yamamoto said.
Currently, the BOJ sets financial and price stability as its mandate, but not job growth.
($ 1 = 113.5300 yen)
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