Abe’s priority for now is to put Japan economy on recovery path

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TOKYO- Japan will resume fiscal reform once the economy overcomes the hit from the coronavirus pandemic, Prime Minister Shinzo Abe said, brushing aside calls by some lawmakers to keep spending permanently with money printed by the central bank.

The government has pledged to spend a combined $2.2 trillion in two stimulus packages to cushion the economic blow from the pandemic, while the central bank has pledged to buy unlimited amounts of bonds to cap borrowing costs at zero.

“Japan’s economy is battling a crisis, so the priority now is to use all available means to put it on a recovery path,” Abe told parliament on Monday, when asked how Japan would reconcile the huge spending with the need to fix its tattered finances.

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“By achieving economic growth, Japan can restore fiscal health. But that doesn’t mean Japan can endlessly increase debt,” he said, adding the government will resume efforts to improve the country’s fiscal health once the economy stabilizes.

Abe’s remarks come amid calls from some lawmakers for Japan to prop up the economy via unlimited money-printing to finance government spending – a concept dubbed “Modern Monetary Theory” (MMT) that has been floated by some US academics.

Japan’s economy slipped into recession and is seen suffering an annualized contraction of over 20 percent in April-June, as lockdown measures to contain the pandemic hit consumption and businesses.

Analysts say Japan’s huge public debt – already the biggest among major industrialized nations – constrains its ability to ramp up fiscal spending to spur growth.

S&P Global Ratings last week lowered its outlook on Japan’s sovereign debt rating to stable from positive, citing increased uncertainty over the country’s fiscal health as it boosts spending to combat the health crisis.

Meanwhile, Japanese stocks fell as concerns about a spike in new cases of COVID-19 worldwide poured cold water on hopes of a quick recovery from a coronavirus-driven global recession.

The benchmark Nikkei average dropped 0.50 percent to 22,194.99 by the midday break, with real estate, airlines and shippers leading declines.

As new coronavirus cases resurfaced in China and the United States, worries about a second wave have deepened, prompting fears about prolonged damage to the economy.

On the Nikkei index, there were 91 advancers against 125 decliners on Monday with cyclical shares leading the losses.

Airlines, one of the hardest-hit victims of the global epidemic, were the biggest decliner among the Tokyo Stock Exchange’s 33 industry subindexes as concerns about the virus reared their head.

Shippers dropped 0.4 percent and real estate lost 1.4 percent.

Semi-conductor-related shares were weak, with chip equipment manufacturer Advantest dropping 3.57 percent, Tokyo Electron losing 2.9 percent and Screen Holdings shedding 2.7 percent.

Sapporo Holdings lost 3.7 percent after Nomura cut its rating on the beverage firm and lowered the target price, citing the impact of the COVID-19 epidemic.

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