Opposition parties join New Komeito in call for economic stimulus plan

September 10, 2010

On September 2, New Komeito Chief Representative Natsuo Yamaguchi unveiled a 4 trillion-yen initiative to bolster the Japanese economy. A week later, our party agreed with four opposition parties, including the Liberal Democratic Party and Your Party, to submit a joint economic stimulus plan-which adopted the core objectives specified in New Komeito's proposal (see below)-to Prime Minister Naoto Kan and his administration.

The political opposition is united in the belief that the domestic economy is in dire need for government assistance. For the first quarter of fiscal 2010 (April-June), Japan's GDP grew a paltry 0.1 percent year-on-year. Exports-which the economy continues to depend on for growth-have been hammered by the yen's soaring strength. Japanese automakers and other manufacturers have already shifted a large part of their production overseas-and given the strong yen, that trend will surely accelerate. Fewer factories mean fewer jobs, which will have far-reaching ramifications on the quality of life for all citizens in Japan.

Yet, at a time when the prime minister should be devoting his all to address this and other issues of national import, he is mired in petty party politics, fighting a pitched battle with Democratic Party of Japan strongman Ichiro Ozawa for the DPJ presidency. Even Kan's belated economic package, which was announced on August 30 and backed by Bank of Japan's monetary easing moves, has proven largely irrelevant.

Compared to the ruling coalition's too-little, too-late approach, the economic stimulus package proposed by New Komeito boldly targets four specific areas:

Righting the Strong Yen

Guiding the yen to a more appropriate level is an absolute priority. Under our plan, the Japanese government will aggressively push to convene an international conference to coordinate policy toward this end. While most G8 governments welcome a stronger yen, Tokyo should insist that steps be taken to discourage excessive imbalances and, if necessary, be prepared to unilaterally intervene in foreign exchange markets at the Bank of Japan's discretion, even if the action is largely symbolic.

Halting Deflation

Halting deflation should be a leading objective of the government's monetary policy. We propose that regulators work closely with the Bank of Japan to establish common cost of living targets with the aim of achieving real economic growth of 2 percent and 3-4 percent in nominal terms after three years. The central bank should also adopt additional monetary easing initiatives to follow on its interest rate reduction decided in August.

Locally-Driven Economic Recovery

Under our proposal, 2.39 trillion yen will be budgeted to rejuvenate communities that lie beyond the major cities. Particular focus will be on jump-starting their economies through a special contingency subsidy worth 1.2 trillion. This money will be provided to local governments to be dispensed at their discretion for an array of local needs, from disaster relief to job creation programs. Additional funding will be allocated for road maintenance and construction, earthquake-proofing public schools, housing, agriculture and fisheries, the promotion of tourism and other social capital initiatives.

Creating Jobs, Permanent Positions Locally

Unemployment in non-urban communities is reaching a critical level. To tackle this problem, New Komeito would execute the second stage of two previously adopted initiatives promoting the creation of jobs at the local level. State assistance would also be extended to the jobless to find employment and to short-term part-timers seeking permanent positions.

New Komeito's proposal also includes a special fund to protect abused children and to build facilities for their safe custody, new social security initiatives as well as incentives to promote environmentally-friendly household appliances and housing.