By Leika Kihara and Yoshifumi Takemoto
TOKYO (Reuters) -Japan’s reflationist advocates of expansionary fiscal policy are making a comeback in economic decision-making with some hand-picked by Prime Minister Sanae Takaichi to fill posts in key government panels.
The move heightens the chance proponents of former premier Shinzo Abe’s “Abenomics” stimulus will yield influence on the fiscal and monetary policies of Takaichi, who herself is known as an advocate of loose fiscal and monetary policy.
Among the reflationist academics, former Bank of Japan Deputy Governor Masazumi Wakatabe will join the Council of Economic and Fiscal Policy as one of the four private-sector members, the government said on Friday.
As the government’s top economic panel, the council lays out Japan’s long-term fiscal blueprint and policy priorities. Key economic ministers and the BOJ governor participate in the discussions.
Known as a proponent of aggressive monetary and fiscal stimulus, Wakatabe served at the BOJ from 2018 to 2023 when it was sustaining a massive asset-buying programme deployed under then governor Haruhiko Kuroda.
In an interview with Reuters last month, Wakatabe said the BOJ can raise interest rates if prospects of durably hitting its 2% inflation target improve – but added that doing so could this year could be difficult.
Toshihiro Nagahama, an economist at Dai-ichi Life Research Institute who has advocated steps to stimulate demand, was also appointed as a private-sector member of the council.
“Given how this council discusses key economic and fiscal policies, we appointed members who are suitable under the Takaichi administration after consulting with the prime minister,” Minoru Kiuchi, economic revitalisation minister who oversees the council, told a news conference on Friday.
The appointments contrast with those under previous premier Shigeru Ishiba such as BNP Paribas economist Mana Nakazora, who had called for fiscal discipline and faster normalisation of the BOJ’s ultra-loose monetary policy.
The Takaichi administration has already appointed Takuji Aida, an economist seen as close to the premier, to join her flagship panel tasked to lay out Japan’s growth strategy.
Aida has said Japan should pursue expansionary economic policies until the output gap, which is currently around zero, exceeds 2%. He also calls for a shift away from what he saw as current policies that prioritise fiscal consolidation over steps to stimulate demand.
Japanese stock prices have risen since Takaichi was elected Japan’s first female prime minister on October 21 on market expectations that she will deliver a big spending package backed by low interest rates to reflate the economy.
Sources have told Reuters Takaichi is seen deploying a package of spending that exceeds Ishiba’s 13.9-trillion-yen ($92 billion) plan compiled last year.
($1 = 150.7800 yen)
(Reporting by Leika Kihara and Yoshifumi Takemoto; Editing by Sam Holmes)
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