* Weak yen only by-product of Abenomics - Aso
* Adds fiscal reforms key to avoid bond yield spike
* Japan must use all means to beat deflation
By Leika Kihara
WASHINGTON, April 19 Japan's "Abenomics"
economic policies have led to a cheaper yen but only as a
by-product of stimulus steps to pull the country out of
deflation, Finance Minister Taro Aso said on Friday.
"To say that a cheap yen is our goal will grossly miss the
point," Aso said in a speech at the Center for Strategic and
International Studies (CSIS).
"The big D - deflation - is too difficult and too persistent
to get rid of. We must to use every possible means (to beat it).
At the end of the day, a shrinking Japan can only do harm to the
world," he said in Washington after attending the Group of 20
finance leaders' gathering.
Japan has come under criticism, mainly by some emerging
economies, that its aggressive monetary easing steps are aimed
at weakening the yen and giving its exports a competitive trade
Aso, a skeet shooter who represented Japan for the 1976
Olympic Games, said he would rather call Prime Minister Shinzo
Abe's three "arrows" of growth policies -- bold monetary easing,
fiscal stimulus and structural reforms -- "bazookas" that are
all needed to pull Japan out of chronic deflation.
"Deflation is like a slow-motion death, by losing
temperature," he said. "It is already too late, when you have
finally become aware, that you are a hostage, and that you
cannot escape the vicious cycle."
The bold monetary easing steps undertaken by new Bank of
Japan Governor Haruhiko Kuroda has helped weaken the yen and
boost Tokyo share prices, Aso said.
"It speaks volumes about how important it is to change
people's perceptions, outlook and mindset," he said, describing
Kuroda's approach as "shock and awe" style.
But Aso said the BOJ's huge bond buying must be accompanied
by a credible fiscal reform plan by the government, to avoid
losing market trust in Japan's finances and triggering an
unwelcome spike in bond yields.
"The government must pursue fiscal prudence really hard," he
said. "For us, fiscal prudence is not a task for the future. It
is a clear and present one that we ought to start tackling now,
rather than later," he said.
Japan's public debt, double the size of its economy, is the
biggest among major industrialised economies, as a result of
decades of massive fiscal spending to revitalise the economy.
That has put the onus of boosting growth on the BOJ.
Under Kuroda -- chosen by Abe to pursue the first "arrow" of
bold monetary easing -- the BOJ unleashed an intense burst of
monetary stimulus earlier this month, pledging to inject about
$1.4 trillion into the economy in less than two years, a major
shift from its previous incremental steps.