By Makiko Yamazaki
TOKYO (Reuters) -Two newly appointed members of the Japanese government’s top economic panel called on Wednesday for an economic stimulus package larger than last year’s, highlighting a stronger reflationist sway on fiscal policy under the new administration.
Former Bank of Japan Deputy Governor Masazumi Wakatabe and Toshihiro Nagahama, chief economist at Dai-ichi Life Research Institute, both known advocates of former Prime Minister Shinzo Abe’s “Abenomics” stimulus, now serve as two of the four private-sector members on the Council of Economic and Fiscal Policy.
At the panel’s first meeting since Prime Minister Sanae Takaichi’s administration kicked in, Wakatabe and Nagahama both said the planned economic stimulus must exceed last year’s 13.9 trillion yen ($92.19 billion).
“Expectations for proactive fiscal policy could weaken if the general account expenditure for the package fails to exceed the previous year’s level,” Nagahama said.
The package will focus on measures to cushion the blow to households from the rising cost of living, investment in crisis management and growth areas, as well as steps to boost Japan’s defence capabilities.
As the government’s top economic panel, the council lays out Japan’s long-term fiscal blueprint and policy priorities. Key economic ministers and the BOJ governor participate in the discussions.
The Takaichi administration’s focus on expansionary policies could complicate the BOJ’s decision on how soon to resume a rate-hike cycle that has been paused due to uncertainty over the economic fallout from higher U.S. tariffs.
Wakatabe and Nagahama both citied a likely sharp GDP contraction in the July–September quarter as signs of economic deterioration that underscore the need for aggressive stimulus measures.
A Reuters poll showed Japan’s gross domestic product (GDP), due for release on Monday, likely shrank an annualised 2.5% in the third quarter, the first contraction in six quarters driven by a hit to exports from U.S. tariffs.
Japanese stock prices have risen since Takaichi was elected the nation’s first female prime minister on October 21 on market expectations that her administration will ramp up spending to revive the economy.
Wakatabe, a long-time proponent of reflationary policy, emphasized the need to move beyond deflation-era fiscal thinking.
He urged policymakers to abandon the single-year budget principle in favour of multi-year investment planning with some room for deficits, echoing Takaichi’s own calls for such a shift.
Wakatabe also emphasised the importance of close coordination between fiscal and monetary policy, citing Article 4 of the Bank of Japan Act, which calls for policy alignment to ensure stable and sustainable economic growth.
($1 = 150.7800 yen)
(Reporting by Makiko YamazakiEditing by Shri Navaratnam)
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