Economy Is Top Priority for New Cabinet, Reports Reuters

By Tetsushi Kajimoto

TOKYO – On Wednesday, Japanese Prime Minister Shinzo Abe emphasized that the primary focus of his recently reshuffled cabinet would be the economy, asserting his commitment to pulling the nation out of deflation.

In the limited cabinet reshuffle—following the approval of a substantial fiscal stimulus package amounting to 13.5 trillion yen (approximately $133.25 billion) aimed at reviving the economy, which has been trapped in deflation for over 15 years—Abe retained most of the key positions unchanged.

"The utmost priority is the economy," he stated during a news conference, stressing the need to address the risks associated with the global economy. He committed to utilizing all available policy instruments to effectively combat deflation.

Abe highlighted the collaborative effort required between the government and the Bank of Japan to overcome deflation, expressing his confidence that the central bank would implement decisive policy measures to reach its 2 percent inflation target. "Specific policy steps should be left up to the BOJ to decide. I trust Governor (Haruhiko) Kuroda’s capability," he remarked.

In his broader strategy for rejuvenating the stagnant economy, Abe identified labor market reform as "the biggest challenge." He pledged to develop a concrete plan for enhancing employment opportunities by the end of the current fiscal year, which concludes in March 2017.

Despite three years of aggressive monetary, fiscal, and structural reforms known as "Abenomics," the world’s third-largest economy has seen limited resurgence, leading to growing anxiety in financial markets regarding the Bank of Japan’s capacity to stimulate growth.

Markets reacted negatively when the Bank of Japan maintained its bond purchasing program, defying expectations for increased buying, which heightened concerns among traders, especially after the BOJ announced plans to reassess its policies in September.

Although Kuroda refrained from making comments on the recent rise in government bond yields, he assured that the upcoming review would not result in a reduction of the central bank’s stimulus efforts.

Investor sentiment has also been dampened by worries that the latest fiscal stimulus package lack sufficient immediacy and direct investment, as the proposed spending is spread over several years, potentially diminishing its impact on the economy.