If necessary, the Japanese government could make available fiscal and monetary stimulus for the economy even though it does not feel there is any need for such an action immediately.
A boost to the world’s third-largest economy can be given at any time by the Japanese government because currently the economy is facing issues because of the trade war between the United States and China, said Japan’s Finance Minister Taro Aso.
But the Japanese government is confident that the economy is being buoyed by robust domestic demand which will set the economy to a moderate recovery, he said. This was a signal that there was no need for any form of immediate additional measures to counter the negative impact of the sales tax increase in the country that was implemented earlier this month.
“Given uncertainty over the global economy, exports are falling and weighing on manufacturers’ output. But the weakness has yet to spread to non-manufacturers or domestic demand,” Aso told reporters after attending a Group of 20 finance leaders’ working dinner.
“If we need to compile some form of an economic stimulus package, we are ready to take various types of fiscal measures flexibly,” he said.
Japan must deploy a mix of government-led action so that the Japanese government can ward off the next financial crisis even though the current global risks are nowhere closely similar to the conditions that were witnessed following the global financial crisis after the collapse of Lehman Brothers in 2008, Aso said. The mixed measures that can be taken by Japan comprise of fiscal measures – those taken by the government, and other measures that are put into force to make it easier for companies and individuals to secure debt which is referred to as monetary policy.
“When you look back at the problems Japan faced, including deflation, they can’t be fixed by monetary policy alone. You need a coordinated monetary and fiscal response,” he said.
Japan reported a growth of 1.3 per cent for the second quarter of 2019 which was lower than what was initially expected by analysts and economists.
However, Aso said he still expected a moderate recovery in global growth to continue through next year.
The recently implemented increase in sales tax in Japan form 8 per cent to 10 per cent in October, which had been deferred twice, was done to generate additional revenues to bring down the huge public debt that the country currently has.
A number of measures to cushion some of the impact of the sale tax hike has also been implemented by the Japanese government which include offering shopping vouchers for consumers and providing some relief for digital payments for purchases made by consumers.
Yet, economists are concerned about the impact of the sale tax hike on the export-reliant economy of Japan even as it is being impacted by the ongoing US-China trade war.
In the eventuality of the hike in sales tax in October hitting t to the economy in a larger extent than expected, Japan can ramp up fiscal stimulus, International Monetary Fund Deputy Managing Director Mitsuhiro Furusawa has said.
(Adapted from AlJazeera.com)