Japan’s stimulus package must top $100 billion, ruling party leader says

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TOKYO — Japan’s promised economic stimulus must be large enough to overcome the economy’s output gap by about 15 trillion yen ($100 billion), a senior ruling party official said on Sunday.

“Japan’s gross domestic product (GDP) gap is now about 15 trillion yen. It is not enough to fill this gap,” said Yoshitaka Shindo, acting executive chairman of the ruling Liberal Democratic Party (LDP) policy research council.

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« Quality and size matter, » Shindo said of the package, crafted by Prime Minister Fumio Kishida’s administration to cushion the blow of rising fuel and commodity prices.

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The LDP handed its proposal to Kishida, the party leader, last week, Shindo said during a broadcast on public broadcaster NHK.

The remarks come on top of growing calls from ruling party officials for heavy spending to ease the pressure of rising inflation on households.

On monetary policy, Shindo said if the Bank of Japan were to eventually exit its ultra-loose policy, doing so now would be premature as the Japanese economy and wage growth remain weak.

« No country is using monetary policy to manipulate exchange rates, » Shindo said, dismissing the idea that the BOJ should raise interest rates to moderate the yen’s sharp drop to a 32-year low .

Japan intervened in the foreign exchange market on Friday to buy the yen for the second time in a month after its currency weakened to nearly 152 to the dollar, in part due to the widening spread between exchange rates. American and Japanese interest.

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“What is important is to achieve price stability. For that to happen, we need to have higher salaries.

The government is expected to announce the stimulus package by the end of this month as the weak yen adds to household pain by inflating the cost of already expensive food and fuel.

The government and the LDP-led coalition are considering public spending of more than 20 trillion yen ($140 billion) to finance the package, the Kyodo news agency reported on Friday.

The package could go beyond that, given municipal government spending, a significant portion to be financed through debt issuance, Kyodo said.

($1 = 147.6400 yen) (Reporting by Leika Kihara; Editing by William Mallard)