--Japan ex-EPA Sakaiya against public stock-support steps
--Japan ex-EPA Sakaiya urges BOJ to maintain easy monetary stance
By Shigeo Kodama, BridgeNews
Tokyo--Jan. 12--Former Director-General of Japan's Economic Planning Agency Taichi Sakaiya said Friday recovery in personal consumption in the near future is highly possible, and Japan's economy will get out of the so-called "second bottom" soon. Consumption indicators have been closely watched lately, as that economic component is seen as key in realizing self-sustainable economic recovery.
* * * Sakaiya, now special advisor to the cabinet, said the following 4 factors will help boost consumption:
--CPI has been falling.
--Households' financial assets are increasing significantly, totaling 1400 trillion yen now.
--Year-end bonus payments in the calendar year 2000 posted growth, after showing falls for the previous 2 years.
--Number of job offers is rising.
Asked about discussions among politicians about possible steps supporting the stock prices or those urging financial institutions not to unwind cross share holdings, Sakaiya said, "I am strongly against" such measures because they are completely opposite to principle of market economy. He added, "Financial institutions' unwinding is not necessarily bad."
As for monetary policy, Sakaiya, speaking at the Foreign Correspondents Club of Japan, said the Bank of Japan should hold the ongoing low-interest-rate stance for a while.
Regarding details of the monetary policy, Sakaiya said the current BOJ stance, in which it guides the unsecured overnight call loan rate at around 0.25%, "is not necessarily desirable," adding that BOJ should just supply ample funds to the market, letting the market itself decide on levels of the call loan rate.
If his suggestions are accepted, the call loan rate will be lower than 0.25%, and term interest rates for 3 month and 6 month will decline, he said.
As for lingering bad loan issues, Sakaiya said, "It is not needed to take drastic policy (measures) now," and said that some time is needed to settle the issue.
Sakaiya said the bad loan problem will not trigger financial systemic crises as was seen in 1998, adding that the cautious lending stance of financial institutions will not cause economic deterioration now, unlike in 1998.
Meanwhile, Sakaiya repeated Japan should not switch to a policy seeking fiscal reform, abandoning the policy of stimulating the economy, now.
He admitted the fact that the total debt of the central government and local governments will total about 666 trillion at the end of fiscal year 2001-2002 (April-March) is "near crisis" levels.
However, he said if the government can limit the volume of fiscal deficit to a "reasonable range," such as 3% of gross domestic product every year, the government does not necessarily have to totally pay back such debt.
Sakaiya also said the fact that the yield of the 10-year benchmark Japan government bond (JGB) is now lower than 1.6% indicates that JGB's credibility is higher than that of any nations' government bonds. End