TOKYO, Sept. 7 (Reuters) – Japanese Prime Minister Yoshihide Suga, whose backing notes are in tatters ahead of the general election, announced last week that he would step down, paving the way for his replacement as prime minister and increasing uncertainty over the outlook for economic policy.
Below are the key economic policy views of the candidates for the next prime minister of Japan.
A former foreign minister with experience as a banker, Kishida had previously said that if he were to become leader of the ruling party, fiscal consolidation would be a major pillar of politics.
He also expressed doubts about the Bank of Japan’s prolonged ultra-flexible monetary policy, saying that in 2018 the current stimulus cannot last forever.
As the economy suffers the shock of the COVID-19 pandemic, Kishida told a magazine on Monday that the BOJ must maintain its 2% inflation target and ultra-accommodative monetary policy. He also said that Japan needed a fiscal stimulus package of more than 30 trillion yen ($ 273 billion). Read more
Kishida’s economic position differs somewhat from that of Suga, who took over much of the “Abenomics” stimulus policy from his predecessor Shinzo Abe.
At a recent press conference, Kishida said that Japan could not solve structural problems simply by supporting growth, distancing itself from the Abenomics who sought to mend Japan’s tattered finances by achieving high growth and increasing tax revenues.
Kishida also stressed the need to distribute more wealth to households, in contrast to the focus by Abenomics on increasing corporate profits in the hope that the benefits will eventually trickle down to employees.
Former home affairs minister and Abe’s close aide, Takaichi said she would keep a reshaped version of “Abenomics,” including bold monetary easing.
In a recent interview with national media, Takaichi said Japan should freeze a balanced budget target until inflation hits the central bank’s 2% target, so that fiscal and monetary policies remain expansionary.
She also said that Japan should issue more government bonds to finance investments in growth areas because it “doesn’t have to worry about defaulting on its debt” given the low costs. current borrowing and the ability of the central bank to continue printing money.
After serving as minister responsible for administrative reform and deregulation, Kono called for cutting unnecessary spending in areas such as rising medical costs in Japan. On its website, it also offers to accept foreign workers to cope with a chronic labor shortage caused by the rapidly aging population.
As head of a ruling party panel on administrative reform in 2017, Kono urged the BOJ to communicate more clearly an exit strategy from ultra-loose politics. He said the more the BOJ continues to expand its balance sheet, “the harder it would be to get out.”
Former defense minister and Abe’s rival, Ishiba has sharply criticized the Abenomics, saying the policies have enriched shareholders by supporting stock prices but have brought little benefit to workers.
He also criticized the BOJ’s ultra-low interest rates for harming regional banks and called for greater spending on public works to address growing inequalities.
In an interview with Reuters last year, Ishiba said that Japan’s fiscal and monetary stimulus measures have become so important that their removal could destabilize the economy.
He keeps his distance from the supporters of big spending. In the interview, Ishiba cautioned against cutting sales tax in Japan or offering block payments, saying any aid must be targeted at households and small businesses hardest hit by the pandemic.
($ 1 = 109.7600 yen)
Reporting by Leika Kihara, Tetsushi Kajimoto, Daniel Leussink and Kantaro Komiya; Editing by Sam Holmes
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