- Title: JAPAN: Prime Minister Yukio Hatoyama urges all-out effort to fight deflation
- Date: 27th March 2010
- Summary: TOKYO, JAPAN (RECENT) (REUTERS) VARIOUS OF PEOPLE STANDING ON SIDEWALK /COMMUTERS VARIOUS OF PEOPLE CROSSING STREET PEOPLE WALKING IN MARKET VARIOUS OF PEOPLE BUYING FOOD IN STALL PEOPLE WAKING PAST MARKET STALLS
- Embargoed: 11th April 2010 13:00
- Location: Japan
- Country: Japan
- Topics: Economic News,Domestic Politics
- Reuters ID: LVAEOJ56228RUXA8JHHAEORIRNFC
- Story Text: Japanese Prime Minister Yukio Hatoyama urges all-out effort to fight deflation and warns against issuance of bonds to cover fiscal deficit.
Japanese Prime Minister Yukio Hatoyama said on Friday (March 26) his country should make an all-out effort to end deflation.
His comments came after Japan's parliament on Wednesday (March 24) approved a record 1 trillion U.S. dollar-budget for the fiscal year from April, with an all-time high of 44.3 trillion yen (490 billion U.S. dollars) in new bond issuance, underlining its public finance troubles.
"We are certain that there will be a direct, positive impact on the lives of the Japanese people from now on. It is important to stimulate domestic demand, household demand, in order to fight the current deflation," Hatoyama told reporters.
The government is worried about an economic downturn ahead of an upper house election expected in July and many analysts expect it to prod the Bank of Japan into easing monetary policy further to beat deflation.
To regain public support, Japan's parliament on Friday passed a child allowance bill, which is for the year of 2010.
The bill provides 13,000 yen (about 140 U.S. dollars) per month to each child until he or she graduates from junior high school.
About 17 million children are expected to receive the allowance each month adding up to a total of about 2.25 billion yen (24 million U.S. dollars), according to government estimates.
Hatoyama also said Japan needs to avoid a spiraling issuance of bonds to cover its fiscal deficit, given that outstanding debt is almost twice the size of gross domestic product, the worst ratio among industralised nations.
"The complete loss of fiscal prudence would prompt a large-scale issuance of deficit bonds and we need to do what we can to avoid this situation," he said.
The premier also reiterated his pledge not to raise the consumption tax while he is in office as he tries to tread a fine line between spending enough to keep the economy growing without worsening an already large debt burden.
The Democratic Party-led government is slumping in the polls and under pressure to boost spending.
The government is also set to announce a fiscal discipline plan in June, and some economists worry that credit ratings agencies will follow through on their warnings of a downgrade.
Fitch, Moody's and Standard and Poor's have all warned Japan it faces a ratings downgrade, which could raise the borrowing costs for the most indebted of the industrialised nations and rattle investors who are already nervous about Greece's debt and the sovereign risk facing other European nations.
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