Miyazawa Shocks With Bold Warning On Japan's Fiscal Debt
TOKYO (Dow Jones)--As Japan's economy sputters and politicians prepare yet another stimulus package, Finance Minister Kiichi Miyazawa warned that a decade of deficit spending has blown a hole in the nation's balance sheet.
"Japan's public finances are very near collapsing," Miyazawa said Thursday in his starkest signal yet about Japan's burgeoning government debt.
The dollar shot up on the remark, knocking the yen to a 15-month low on what the markets took to be fresh evidence of the rickety state of the world's second-biggest economy.
But although the comment riveted the markets, it doesn't represent a change in policy for Miyazawa or his ministry, who have long sounded the alarm about runaway deficit spending.
His top deputy, Vice Minister Toshiro Mutoh, said later that Miyazawa's remark was in line with previous statements and Miyazawa himself grumbled to a reporter that "wires services are stupid" to have made a bid deal of the remark.
Indeed, his comment, an answer given in parliamentary budget debate, was not a sudden cry of desperation. It was part of a long-standing push to craft a long-term solution to Japan's debt woes. "We need fundamental fiscal restructuring aimed at rebuilding our finances in the 21st century, looking 10, 20 years into the future," Miyazawa said.
Eleven economic stimulus packages and a decade of recession-shrunken tax revenues since the bursting of the late-1980s bubble economy have pushed Japan's public debt to nearly 130% of gross domestic product, the worst in the industrial world.
The debt explosion has prompted Moody's Investors Service to downgrade Japan's yen-denominated debt twice in recent years and Standard & Poor's Corp. to topple the nation from its topnotch rating just last month.
03/08/2001
Dow Jones News Services
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