FILE PHOTO: A man wearing a protective mask stands in front of the headquarters of Bank of Japan amid the coronavirus disease (COVID-19) outbreak in Tokyo, Japan, May 22, 2020.REUTERS/Kim Kyung-Hoon
September 7, 2021
TOKYO (Reuters) – Japanese Prime Minister Yoshihide Suga, his support ratings in tatters ahead of a general election, said last week he would step down, setting the stage for his replacement as premier and heightening uncertainty on the outlook for economic policy.
Below are the key economic policy views of candidates to become Japan’s next prime minister.
A former foreign minister with experience as a banker, Kishida had previously said if he were to become ruling party head, fiscal consolidation would be a major pillar of policy.
He has also voiced doubts over the Bank of Japan’s prolonged ultra-loose monetary policy, saying in 2018 the current stimulus cannot last forever.
With the economy suffering from the COVID-19 pandemic’s shock, Kishida told a magazine on Monday the BOJ must maintain its 2% inflation target and ultra-loose monetary policy. He also said Japan needs a fiscal stimulus package of more than 30 trillion yen ($273 billion).
Kishida’s economic stance differs somewhat from that of Suga, who carried over much of his predecessor Shinzo Abe’s “Abenomics” reflationary policies.
In a recent news conference, Kishida said Japan cannot solve structural problems just by propping up growth, distancing himself from Abenomics that sought to fix Japan’s tattered finances by achieving high growth and boosting tax revenues.
Kishida also stressed the need to distribute more wealth to households, in contrast to the focus of Abenomics on boosting corporate profits in hope the benefits will eventually trickle down to wage-earners.
A former internal affairs minister and a close associate of Abe, Takaichi has said she would carry over a re-modeled version of “Abenomics” including bold monetary easing.
In a recent interview with domestic media, Takaichi said Japan should freeze a goal for achieving a balanced budget until inflation hits the central bank’s 2% target, so that both fiscal and monetary policies are kept expansionary.
She also said Japan should issue more government bonds to fund investment in growth areas, because it “does not need to worry about defaulting on its debt” given current low borrowing costs and the central bank’s ability to keep printing money.
Having served as minister in charge of administrative reform and deregulation, Kono has called for cutting wasteful spending on areas including Japan’s ballooning medical fees. On his website, he also proposes accepting foreign workers to address a chronic labour shortage caused by a rapidly ageing population.
As head of a ruling party panel on administrative reform in 2017, Kono urged the BOJ to communicate more clearly an exit strategy from ultra-loose policy. He said the longer the BOJ keeps expanding its balance sheet, “the more difficult it would be to exit.”
A former defence minister and a rival of Abe, Ishiba has been a vocal critic of Abenomics, saying the policies made stock-holders rich by propping up share prices but brought few benefits to workers.
He has also criticised the BOJ’s ultra-low interest rates for hurting regional banks and called for bigger public works spending to remedy growing inequality.
In an interview with Reuters last year, Ishiba said Japan’s fiscal and monetary stimulus measures have become so big that rolling them back could destabilise the economy.
He keeps a distance from advocates of big spending. In the interview, Ishiba voiced caution over cutting Japan’s sales tax or offering blanket payouts, saying any aid must be targetted to households and small firms hit hardest by the pandemic.
($1 = 109.7600 yen)
(Reporting by Leika Kihara, Tetsushi Kajimoto, Daniel Leussink and Kantaro Komiya; Editing by Sam Holmes)