Japan’s stimulus package must exceed $100 billion, ruling party official says

TOKYO: Japan’s pledged stimulus package must be large enough to top the economy’s output gap of about 15 trillion yen ($100 billion), a senior ruling party official said on Sunday.

“Japan’s gross domestic product (GDP) gap is currently around ¥15 trillion. Closing this gap is not enough,” said Yoshitaka Shindo, executive acting chairman of the policy research council of the ruling Liberal Democratic Party (LDP). said.

“Both quality and size are important,” Shindo said of the package created by Prime Minister Fumio Kishida’s government to soften the blow from rising fuel and raw material prices.

Last week, the LDP handed over the proposal to party leader Kishida, Shindo said on public broadcaster NHK.

The remarks have fueled calls from ruling party officials for more spending to ease the strain on household budgets from rising inflation.

On monetary policy, Governor Shindo said the BOJ must eventually end its ultra-loose policy, but that it is premature at this point as Japan’s economy and wage growth remain weak.

“No country is using monetary policy to manipulate exchange rates,” Shindo said, adding that the BOJ should raise interest rates to cushion the yen’s sharp depreciation to its lowest level in 32 years. I dismissed the point of view.

With interest rate differentials between Japan and the United States widening, Japan intervened in the foreign exchange market on Friday, buying the yen for the second time in a month after depreciating to nearly $152. .

“The key is to achieve price stability. To achieve this, we need to raise wages.”

The government plans to announce an economic stimulus package by the end of this month. A weaker yen is pushing up the cost of already expensive food and fuel, adding to the pain for households.

The government and the LDP-led coalition are considering more than 20 trillion yen ($140 billion) in national spending to fund the package, Kyodo News reported Friday.

The package could grow beyond that given local government spending, a significant portion of which will be funded by government bond issuance, Kyodo said.

(1 dollar = 147.6400 yen)