Japan’s ruling Democratic Party urged cabinet ministers on Wednesday to compile an extra budget worth more than 4.8 trillion yen ($57.66 billion/ Rs 2.57 lakh crore) to bolster an economy struggling with persistent deflation and a rising yen.
The Democrats also said the government and the central bank must cooperate more closely, as the yen’s strength threatens to derail Japan’s economic recovery and deepen deflation, although analysts doubt the stimulus steps could have much impact.
To make more efficient use of Japan’s massive foreign exchange reserves, the Democrats proposed setting up a sovereign wealth fund similar to funds in China and Singapore.
They also said Japan should take advantage of a strong yen to invest in overseas resource development, including rare earth minerals, which are vital for electronics and automobiles.
Based on the proposal, the government will decide on an economic stimulus package on Friday and then draft an extra budget for the fiscal year to next March without issuing more debt, by tapping financial sources such as surpluses in annual budgets.
“Part of this spending is related to improving the safety net,” said Seiji Shiraishi, chief economist at HSBC in Tokyo.