JAPAN: Japan targets deflation and debt control

2010-4-13

By Tomoko A. Hosaka 

JAPAN'S finance minister said yesterday his government deserves credit for guiding the economy out of recession but must now focus on beating deflation, controlling debt and reigniting growth.

Stock prices are up since the government of Prime Minister Yukio Hatoyama swept into power last summer and the Cabinet met its goal of passing a budget before the March 31 end of the fiscal year, Naoto Kan said in a speech at the Foreign Correspondents' Club of Japan.

"In the seven months of the Hatoyama administration, you cannot deny the fact that the fiscal and economic situation is improving if you look at the results," Kan said.

But he expressed concern about deflation and the government's ballooning debt - the highest in the industrialized world at nearly double the size of Japan's gross domestic product.

With little room to maneuver on the fiscal policy front, Kan has been particularly vocal about the central bank's role in fighting falling prices. The Bank of Japan in March expanded a cheap loan program to help boost liquidity amid the political pressure.

The Bank of Japan sees monetary easing as having limited impact on deflation, Kan said. But they both agree deflation is unacceptable. The central bank has said inflation of up to 2 percent would be desirable. Kan said he would embrace a higher goal.

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