A senior ruling party official on Thursday said Japan must compile an economic stimulus package worth at least 32-33 trillion yen ($282-$290 billion). That is to cushion the impact of the coronavirus pandemic, he said.
Kozo Yamamoto, an architect of former premier Shinzo Abe’s “Abenomics” stimulus policies, has said that such large-scale spending would be needed to fill Japan’s output gap. Moreover, to achieve the central bank’s 2% inflation target.
He said the package can be funded by issuing Japanese government bonds (JGB). The government should issue a massive amount of long-term JGBs, which can be purchased aggressively by the central bank, Yamamoto added.
Yamamoto, a former finance ministry official, is now Prime Minister Fumio Kishida’s associate on economic policy. He has been deeply involved in the creation of Abenomics, a mix of massive monetary and fiscal stimulus and a growth strategy deployed in 2013. That was to pull Japan out of economic stagnation.
The prime minister has said he will sustain the stimulus policies of Abenomics. He will take additional measures to distribute the wealth more broadly to households, he said. Kishida also pledged to compile a spending package worth several tens of trillion yen.
Yamamoto said what’s important first and foremost is to achieve strong economic growth with the three arrows of Abenomics. Only then can they talk about redistribution, he said. He also added that he frequently exchanges emails with the premier.
Although Japan must eventually raise taxes on capital gains and dividends to narrow the income gap, Yamamoto said, it will take at least until fiscal 2023 to lay out details.
Yamamoto has also spearheaded the party’s proposals on financial affairs. He repeated the need for the country to act swiftly towards issuing a central bank digital currency (CBDC).
That would require revising the law governing the Bank of Japan (BOJ), he said. That would create an opportunity for other changes such as adding job creation to the central bank’s mandate.
He said they need to make the BOJ accountable for both price stability and job creation.
Currently, the BOJ sets price and financial stability as its mandate, but not job growth.
The Constitutional Democratic Party of Japan
Meanwhile on Thursday, Japan’s largest opposition, the Constitutional Democratic Party of Japan (CDPJ), said it would try to close the country’s income gap with wealth redistribution. That is if it were to take power in the Oct. 31 election.
It is a position echoed by Kishida, who is also head of the ruling Liberal Democratic Party (LDP), blurring policy differences between the LDP and CDPJ ahead of the lower house election.