Japan PM says stimulus spending not ‘forever’

Japan’s government will not continue stimulus spending “forever”, Shinzo Abe, the prime minister, has said in a policy speech previewing a budget that will raise more in taxes than it does from borrowing.

For the last four years, the Japanese government has primarily raised money from selling bonds. Abe plans to overturn that trend.

“We can’t continue fiscal spending forever,” he told parliament at the opening of a new session.

“We will draw up and implement a growth strategy that will see private investment and consumption grow sustainably … we can’t exit from deflation and from a high yen by keeping the past measures.”

The policy speech comes after his government announced a $226.5bn 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 economic policy: aggressive monetary easing, flexible fiscal spending and a growth strategy that would induce private investment.

Growing popularity

Japan’s budget for fiscal 2013 starting April is likely to stand at 92.61tn yen ($1.05tn), with revenue estimated at 43.10tn yen and new bond issuance at 42.85tn – the first time in four years that revenue will surpass new bond issues, major newspapers reported Monday.

Under the budget plan, spending on defence will increase by 40bn 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.

A survey published Monday by the business daily Nikkei showed public support for Abe rose by six percentage points to 68 percent from late last month, just days after his cabinet was launched.

As well as broad approval of economic management 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 on the armed response, which many in Japan criticised as hasty.

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