UPDATE 2-Japan's new finmin: economic recovery top priority
(For more on Japan's new leadership click [ID:nT114525]) (Adds Yosano comments)
TOKYO, Sept 25 (Reuters) - Japanese Finance Minister Shoichi Nakagawa said on Thursday his focus in his new job was to foster a recovery in the nation's faltering economy, which is on the brink of recession.
"In this job, achieving economic recovery is the top priority," Nakagawa told a news conference, adding that it was worth considering a proposal for tax breaks on stocks by Prime Minister Taro Aso, who was confirmed as prime minister on by parliament Wednesday.
Some economists fear that Aso, an advocate of additional spending and tax cuts to boost the economy, might slow efforts to cut Japan's huge public debt that is already 1-½ times GDP -- the worst among major industrialised nations.
Japan's economy suffered its biggest quarterly contraction in seven years in the second quarter, with the government warning the world's No.2 economy is heading towards recession as high energy and food prices bite.
Nakagawa said he was worried about faltering exports and capital spending -- both among the key drivers of growth in Japan in recent years, as major manufacturers such as Toyota and Matsushita have built up strong global brands.
Japan's trade balance slid into deficit in August as sky-high oil prices ramped up import costs while exports slowed to a crawl, while capital expenditure and business confidence have both faltered. ECONJP [JPTBAL=ECI]
Aso says it would take three years to heal Japan's economic problems, and his willingness to put off the government's goal of balancing its budget by fiscal 2011/12 has alarmed fiscal reformers in his party, as well as some economists.
The new prime minister said on Wednesday that the target of balancing the budget by 2012 was important, but added the economy had worsened since that goal had been set.
MORE ECONOMIC STEPS?
Nakagawa said fiscal reform is indispensable, but left room for more economic steps if Japan's recent economic package -- new spending of 1.8 trillion yen ($17.01 billion) aimed at easing the pain from high oil and food prices -- is not enough.
"If the economy gets cheered and returns to a growth path with the package, that would be great. But if that is not the case, I don't think the economy is on a firm enough footing for us to say we can stop with measures now," Nakagawa said.
Kaoru Yosano, who finished a distant second to Aso in Japan's leadership race but stayed as economics minister, has been advocating a rise in the politically sensitive consumption tax from the current five percent in coming years.
But he said on Thursday that any increase should be gradual.
"Even if it (the hike) is in three years from now, one percentage point at a time is the limit that is politically tolerable," Yosano told a group of reporters in an interview. Continued...
