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2008年10月12日 (日)


2008/10/11 --The Asahi Shimbun, Oct. 10(IHT/Asahi: October 11,2008)

EDITORIAL: More stimulus measures


'Restoring fiscal health is extremely important, but for Japan at present, economic recovery is the top priority." This is a passage from an economic policy speech delivered by then Economic Planning Agency chief Taichi Sakaiya at the Diet eight years ago, when the administration of Prime Minister Keizo Obuchi was struggling with Japan's home-grown economic crisis. Strikingly similar refrains have been coming recently from the mouths of top government and ruling coalition officials, including Prime Minister Taro Aso.



On Thursday, the day after the Lower House passed a supplementary budget to finance an emergency spending package, Aso ordered an additional shot in the arm for the faltering economy.


The precise scope of the global financial tempest that started in the United States still remains unclear. It is, however, certain that the crisis will seriously affect the U.S. and other economies around the world. The global economy is still in the early stages of a major downturn. It should be assumed that it will be years before the current crisis comes to an end and global economic conditions start improving.


The nation's economy, which had been on an upward trajectory for several years in its longest postwar expansion, due mainly to strong export growth, is bound to suffer badly from the cascading effects of the financial sector's implosion. We need to steel ourselves to deal with relentless downward pressures on the domestic economy.


It is the job of politicians to plan and implement policy measures to calm public anxiety under such circumstances. What is troubling is that the Aso administration appears to be inclined toward old-school fiscal actions, such as tax cuts and public works spending, to pump up the economy. The administration has indicated a willingness to issue new government bonds to finance these measures if necessary.


All this sounds like a return to the days of the Obuchi administration, which spent huge amounts on public works projects and tax reductions. It is hard to resist the temptation to lampoon Aso's response to the situation as a reflexive resort to the old cure for economic ills. A series of fiscal stimulus packages to steer the economy out of the doldrums following the early 1990s collapse of stock and land speculation bubbles have saddled the central government alone with 550 trillion yen of debt. This pyramid of public debt places a tight constraint on state finances.


A new spending drive could be conceivable if there were more fiscal leeway. But the fiscal resources available are very limited. The economic downturn has just begun and is likely to shape up as a lengthy and deep recession. The precious little money available to deal with the slump must be used in the most effective way possible at the most effective time.


Given the aging and shrinking population, what the government should do now is push through an overhaul of the social security system for its long-term sustainability. It will be impossible to restore public confidence without rebuilding the social safety net. This may sound like a roundabout way to re-energize the floundering economy, but this approach will eventually start stoking domestic demand.


At a recent session of the Lower House Budget Committee, Seiji Maehara, former chief of main opposition Minshuto (Democratic Party of Japan), urged the government to reallocate a considerable portion of tax revenues earmarked for road-related projects to social security programs. People's concerns about job security and post-retirement life are issues that should be tackled now.


The government should offer loan guarantees to ensure continued flows of money into small and medium-sized companies that are facing a cash squeeze due to the financial crisis. It may also be effective to provide policy support to companies trying to protect the jobs of their employees and change their business models for growth driven more by domestic demand.


Instead of public spending and tax cuts that are spread thin across the economy, the government should focus on providing carefully planned policy support to areas where it will be really effective. We hope the Aso administration will adopt this strategy in putting together a new package of measures to save the sinking economy.



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