Free Newsletters - Space News - Defense Alert - Environment Report - Energy Monitor
by Staff Writers
Tokyo, Japan (AFP) Aug 08, 2013
Japan on Thursday pledged to cut a whopping $83 billion out of its budget over two years as it works to bring down the industrialised world's biggest debt mountain.
The move -- amounting to an average reduction of more than 4.0 percent of current annual spending -- comes days after the International Monetary Fund warned again over Tokyo's borrowings.
The pledge was outlined in the government's mid-term fiscal plan, which called for 8.0 trillion yen ($83 billion) to be lopped off Tokyo's deficit between April 2014 and March 2016.
There were few details about where the reductions would be made. The plan comes after Prime Minister Shinzo Abe pledged to boost public spending to stoke Japan's tepid economy.
Another key part of Abe's economic policy, dubbed "Abenomics", is a huge monetary easing plan unveiled by the Bank of Japan in April, as Tokyo looks to counter years of growth-sapping deflation.
The central bank kept its huge bond-buying in place after wrapping up a two-day policy meeting Thursday.
Japan's annual budget is about 93 trillion yen, with about 40 percent of that spending coming from borrowing which has created a debt pile that is more than twice as big as Japan's economy -- the worst among industrialised nations.
The country has not faced a public debt crisis like the kind seen across the eurozone, largely because most of its low interest rate debt is held domestically rather than by international creditors.
However, the IMF and others have warned over Tokyo's ever-increasing debt levels, saying it must follow through on key fiscal and structural reforms to the economy.
Shaking up Japan's economy, while a key plank of Abe's plan, is a difficult sell to many of the country's cossetted industries.
On Monday, the IMF called on Tokyo to adopt a "credible" strategy that includes raising sales taxes to boost government revenue and deregulating the farming sector among others.
Tokyo's latest spending plan, however, is based on what some analysts say is an optimistic scenario in which the economy would grow an average of two percent annually over the next decade, while cutting back on new borrowing.
Another key to its plans is lifting government revenue as Abe's government mulls whether to go ahead with a series of sales tax hikes that would double the rate to 10 percent by 2015.
Abe's previously announced spending plans were largely aimed at boosting job growth and reconstruction following Japan's quake-tsunami disaster more than two years ago.
In an encouraging sign, the economy grew at an annualised clip of 4.1 percent in the first quarter, with April-June growth figures due out next week.
Helping Japanese firms has been a sharp decline in the yen since late last year, with the unit losing about 20 percent of its value against the dollar.
That helps make Japanese exporters more competitive overseas while lifting the value of their repatriated foreign income.
But in a report Thursday, credit rating agency Moody's warned that Abenomics would backfire unless it stimulates real growth in an economy that has struggled for two decades.
"Generating economic growth is an essential element of a credible long-term fiscal adjustment policy, a necessary (but not sufficient) condition for reducing Japan's heavy level of government indebtedness," it said.
"A tipping point for creditworthiness would eventually loom if growth remains elusive and the government's debt and refinancing needs remain at very high levels."
Moody's and rival agencies Fitch and Standard & Poor's have all cut Japan's credit rating over the past few years, pointing to its ballooning public debts.
In May last year, Fitch slashed its rating by two notches, scolding Tokyo for its "leisurely efforts" at cutting back spending.
|The content herein, unless otherwise known to be public domain, are Copyright 1995-2014 - Space Media Network. AFP, UPI and IANS news wire stories are copyright Agence France-Presse, United Press International and Indo-Asia News Service. ESA Portal Reports are copyright European Space Agency. All NASA sourced material is public domain. Additional copyrights may apply in whole or part to other bona fide parties. Advertising does not imply endorsement,agreement or approval of any opinions, statements or information provided by Space Media Network on any Web page published or hosted by Space Media Network. Privacy Statement|