November 27, 2015 / 4:25 AM / 4 years ago

UPDATE 2-Japan's Abe orders extra stimulus spending; eyes growth, fiscal reform

* Extra budget to cover steps on TPP, payouts to low-income groups

* Japan vows to pursue economic revival, fiscal consolidation

* Govt seen to fund extra stimulus without fresh bond issuance (Adds PM Abe quotes, FY2016 budget outline)

By Tetsushi Kajimoto

TOKYO, Nov 27 (Reuters) - Japanese Prime Minister Shinzo Abe on Friday made a widely expected decision to roll out additional stimulus spending - the latest attempt by Tokyo to revitalise a sputtering economy that has failed to break out of decades of stagnation.

Abe directed his cabinet to compile an extra budget for the current fiscal year, which will include support for rural areas hit by the Trans-Pacific Partnership free-trade deal, and cash payouts to low-income groups to spur private consumption.

“While aiming to achieve our goal of halving the primary budget deficit this fiscal year, we will compile measures that will lead directly to resolve problems Japan faces,” Finance Minister Taro Aso told reporters after a cabinet meeting.

The instruction came after the government this week unveiled two packages of steps aimed at tackling Japan’s shrinking population and easing farmers’ worries over the TPP deal.

The extra budget will focus on these measures as well as other urgent steps such as disaster restoration and payouts to low-income households, Aso added.

Abe’s cabinet later in the day approved an outline of next fiscal year’s budget, which came in line with a draft obtained by Reuters last week.

“We will make a progress on the both aims of defeating deflation, revitalising the economy and restoring public finances from the next fiscal year,” Abe told his top economic advisory panel.


The government has not decided on the size of the extra budget but sources told Reuters last month that a supplementary budget worth over 3.1 trillion yen ($25.29 billion) would be considered, without issuing extra bonds to fund the spending.

The extra budget will be compiled next month along with an annual budget for the next fiscal year starting in April 2016. In the last fiscal year, the government compiled a 3.1 trillion yen supplementary budget.

The additional fiscal impulse comes at a time of growing economic strains, with Japan’s relapse into recession in the third quarter and a cooling China stoking uncertainty about the outlook.

With the Bank of Japan’s 2 percent inflation goal seemingly more elusive than ever, Abe has been under pressure to step up support for an economy that has stagnated for decades.

“We will raise the sales tax again in two years and we need to make sure the economy is on solid footing beforehand,” Economics Minister Akira Amari said, referring to the sales tax hike planned for April 2017.

“Right now we are in a critical period as we try to meet our economic growth target.” ($1 = 122.6000 yen) (Additional reporting by Stanley White; Editing by Simon Cameron-Moore)

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