The outlook for Japan's economy is the brightest in a long time but the government now has a big challenge cutting its debt mountain without derailing the recovery, the OECD head said yesterday.
"It's a much more optimistic picture, frankly, than I've seen for a long time," said Donald Johnston, the outgoing head of the Organization for Economic Cooperation and Development.
Japan's debt is the highest among industrialized nations after its government spent trillions of yen on emergency stimulus packages to try to haul the economy out of its deflationary doldrums following the asset bubble burst.
Momentum
Confidence is growing that the world's second-largest economy is finally on a solid recovery path after its decade-long slump, as reflected by the central bank's decision last week to scrap its five-year ultra-loose monetary policy.
"Everybody's very heartened. We've had now 50 months of expansion," Johnston said on the sidelines of an OECD seminar in Tokyo.
"The question is to make sure that expansion is sustained but at the same time we have to emphasize there's a public debt to GDP ratio of 160 percent," Johnston said.
He said the challenge facing the Japanese government now was, "How do you bring about fiscal consolidation without essentially endangering what everybody hopes will be a long-term and sustained recovery?"
"Of course as economic growth increases, that ratio of debt to GDP automatically falls," Johnston said.
Many private-sector economists believe that the government will soon have to raise the consumption tax to top up the public coffers although Prime Minister Junichiro Koizumi has ruled out a hike in the politically sensitive levy, which is now at 5 percent, before 2008.
Tax dilemma
Johnston said that a hike in indirect taxes could be risky.
"Back in 1997 there were the beginnings of a recovery and then the consumption tax was increased and the recovery stopped. So it's finding that balance which is what the government is struggling with," he said.
Johnston met with Japan's Economic and Fiscal Policy Minister Kaoru Yosano late on Monday and urged Tokyo to step up its efforts regarding fiscal reform while interest rates are still at low levels, according to Japanese officials.
The OECD, which groups the world's most developed countries, has previously urged the Bank of Japan to delay raising interest rates to give the economy more room to recover.
In its most recent global economic outlook released in November, the Paris-based grouping forecast 2 percent economic growth in Japan at least until next year.
Johnston, a Canadian who has headed the OECD for a decade, will soon retire and be replaced on June 1 by former Mexican finance minister Jose Angel Gurria.
SECURITY: As China is ‘reshaping’ Hong Kong’s population, Taiwan must raise the eligibility threshold for applications from Hong Kongers, Chiu Chui-cheng said When Hong Kong and Macau citizens apply for residency in Taiwan, it would be under a new category that includes a “national security observation period,” Mainland Affairs Council (MAC) Minister Chiu Chui-cheng (邱垂正) said yesterday. President William Lai (賴清德) on March 13 announced 17 strategies to counter China’s aggression toward Taiwan, including incorporating national security considerations into the review process for residency applications from Hong Kong and Macau citizens. The situation in Hong Kong is constantly changing, Chiu said to media yesterday on the sidelines of the Taipei Technology Run hosted by the Taipei Neihu Technology Park Development Association. With
CARROT AND STICK: While unrelenting in its military threats, China attracted nearly 40,000 Taiwanese to over 400 business events last year Nearly 40,000 Taiwanese last year joined industry events in China, such as conferences and trade fairs, supported by the Chinese government, a study showed yesterday, as Beijing ramps up a charm offensive toward Taipei alongside military pressure. China has long taken a carrot-and-stick approach to Taiwan, threatening it with the prospect of military action while reaching out to those it believes are amenable to Beijing’s point of view. Taiwanese security officials are wary of what they see as Beijing’s influence campaigns to sway public opinion after Taipei and Beijing gradually resumed travel links halted by the COVID-19 pandemic, but the scale of
A US Marine Corps regiment equipped with Naval Strike Missiles (NSM) is set to participate in the upcoming Balikatan 25 exercise in the Luzon Strait, marking the system’s first-ever deployment in the Philippines. US and Philippine officials have separately confirmed that the Navy Marine Expeditionary Ship Interdiction System (NMESIS) — the mobile launch platform for the Naval Strike Missile — would take part in the joint exercise. The missiles are being deployed to “a strategic first island chain chokepoint” in the waters between Taiwan proper and the Philippines, US-based Naval News reported. “The Luzon Strait and Bashi Channel represent a critical access
Pope Francis is be laid to rest on Saturday after lying in state for three days in St Peter’s Basilica, where the faithful are expected to flock to pay their respects to history’s first Latin American pontiff. The cardinals met yesterday in the Vatican’s synod hall to chart the next steps before a conclave begins to choose Francis’ successor, as condolences poured in from around the world. According to current norms, the conclave must begin between May 5 and 10. The cardinals set the funeral for Saturday at 10am in St Peter’s Square, to be celebrated by the dean of the College
RSS