Shiokawa sees time ripe for extra budget

Finance Minister Masajuro Shiokawa sees the need for an extra budget becoming more evident

By staff and wire reports

TOKYO, Japan -- Japanese Finance Minister Masajuro Shiokawa said Wednesday the need for an extra government budget to support the weak economy was becoming more evident.

But he said this was a decision for Prime Minister Junichiro Koizumi to take.

The formal announcement of that decision could come as early as next week.

The world's second-largest economy is in the middle of a severe industrial recession, with the Tokyo stock market in decline and companies such as Toshiba, Fujitsu and NEC all announcing massive job cutbacks in recent weeks.

Nikkei falls below 11,000

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Shiokawa's comments came as the benchmark Nikkei stock index slumped Wednesday to close below the 11,000 mark for the first time in 17 years.

The Japanese government and the ruling coalition reportedly agreed Tuesday to draft a 2.2 trillion yen ($18 billion) supplementary budget for the year to next March.

This would finance emergency employment measures, after government data showed the nation's jobless rate soared to a record 5.0% in July.

Koizumi, who has enjoyed record public popularity since coming to office in April this year, has repeatedly said that his economic reform agenda would involve painful sacrifices in the months ahead.

Time for drastic action

Analysts say his popularity, even at a time of declining consumer confidence, creates the right conditions for drastic action in such troubled areas as the banks' bad loans, and in privatisation of more government enterprises.

Shiokawa said Wednesday he was disappointed by the recent fall in the Tokyo stock market, but said he believed there would be a rebound.

He said the government may have to respond to calls for steps to support the economy, adding: "I think the environment (for compiling an extra budget) is more evident."

Shiokawa also said he expected gross domestic product (GDP) data for the June quarter to be bad. The figures are due to be released next week.

The Koizumi government's top spokesman Yasuo Fukuda, said Wednesday Japan should stick to its pledge of limiting new government bond issues at 30 trillion yen ($250 billion) when compiling an extra budget for fiscal 2001-02.

"What is important is how we use the extra budget," he told a news conference. "We should work within the 30 trillion yen limit."

Reuters contributed to this report.