Tokyo, April 27 (Bloomberg) -- Japan's newly appointed finance minister said thecountry's economy remains fragile and any increase in state spending will depend uponthe amount of growth. ``I can't make any predictions now'' on the need for an extra budget, said MasajuroShiokawa, who was today appointed by Prime Minister Junichiro Koizumi to lead theworld's No. 2 economy. ``We will consider the need (for an extra budget) depending onthe economy's growth and development from now.'' Shiokawa, in his first news conference as finance minister, also said growth prospectswould be hurt by tax increases. The government said the economy grew 0.7 percent inthe fourth quarter of last year, less than the initial estimate of 0.8 percent growth.Economic growth is expected to have slowed to 0.5 percent in the first quarter this year,according to the latest Bloomberg News survey. Koizumi has pledged to cap Japan's new bond sales to reduce public debt, which willlikely reach 130 percent of the country's gross domestic product in March 2002, theworst among the industrial world. Shiokawa said although he will adhere to the prime minister's promise on debt sales limit,the government ``isn't heading toward fiscal tightening.'' Bond prices have risen this week as investors expect Koizumi's debt sales cap will helpavoid oversupply. The yield on the 10-year government bonds has declined to 1.35percent from 1.44 percent last Friday. Koizumi said he wants to cap new bond sales atthis year's level of about 30 trillion yen (243.3 billion).
No Tax Increase
Japan's economy is ``weakening in general,'' though it seems to be ``hitting the secondbottom,'' Shiokawa said. The economy hasn't improved enough to endure higher taxes, headded. Japan's top priority is to reconsider its spending and clean up bad loans plagued with thefinancial system, he said. Still, he said the government shouldn't force banks to get rid of bad loans too hastily.Analysts say Japanese banks have as much as 100 trillion yen in bad loans. By writingoff bad loans, banks will have to stop lending or withdraw loans from financially crippledcompanies and force some of them to bankruptcies, analysts said. The government should implement measures to create jobs to ease the affect of suchbankruptcies and help weak companies merge to survive, Shiokawa said. The government has proposed allowing two years for major banks to write down bad loansfrom their books in two years. Shiokawa said the period of two years is ''just appropriate.''