January 18, 2010 / 5:09 AM / 10 years ago

Japan seeks swift passage of budget bills for econ

(For more stories on the Japanese economy, click [ID:nECONJP])

TOKYO, Jan 18 (Reuters) - The Japanese finance minister urged parliament on Monday to swiftly pass an extra budget for this fiscal year to support a fragile economy, in the hope of avoiding a return to recession ahead of elections expected in the summer.

Prime Minister Yukio Hatoyama wants to pass the budget bills as soon as possible to help the economy recover and overcome deflation, but a funding scandal is clouding the outlook while support for the cabinet is slipping. [ID:nTOE60G020]

“Japan’s economy is picking up but it lacks self-sustaining strength, and the situation remains severe,” Naoto Kan said in his first speech as finance minister to the lower house of parliament, convened amid the scandal embroiling the No.2 in the ruling party.

“Looking ahead, there are risks such as a further worsening of the employment situation and deflation, and the foundations for the economy to return to a strong private demand-led growth path remain fragile.”

The government has crafted an extra budget for the fiscal year that ends in March to fund stimulus spending of 7.2 trillion yen ($79 billion) to prop up the economy. It has also compiled a record $1 trillion budget for the year from April.

Kan, the new finance minister who is also in charge of economic analysis, said the government would strive to overcome deflation and ensure an economic recovery.

The world’s second-biggest economy has been recovering since the second quarter of last year on the back of exports, particularly to China.

But weak domestic demand due to a bleak job market and falling wages has helped push the economy into its second bout of deflation this decade, posing a problem for Hatoyama’s government, in power for just four months.

Kan, 63, also deputy prime minister, has taken over as finance minister from Hirohisa Fujii, 77, who stepped down earlier this month for health reasons. [ID:nTOE60601A] ($1=90.90 Yen) (Reporting by Tetsushi Kajimoto; Editing by Hugh Lawson)

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