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Japan considering how to finance more infrastructure, Suga says
[TOKYO] Japan's government is considering how to finance the development of more infrastructure as a way of bolstering the economy, chief cabinet secretary Yoshihide Suga said Thursday.
His comments came after the Nikkei newspaper reported that the prime minister's office and ministries were considering a program of as much as three trillion yen (US$37 billion) in near-zero interest infrastructure loans to private corporations starting in the autumn as part of an economic stimulus package.
Prime Minister Shinzo Abe has so far side-stepped calls for an early extra budget for the year started in April, instead saying that funds from the main budget will be front-loaded in a bid to jump-start the flagging economy.
In a setback for his "Abenomics" policies, stocks have fallen 12 per cent since the beginning of the year, while major corporations are set for a drop in profits, partly due to a stronger yen.
"The government is of the opinion that the building of domestic infrastructure is an important issue among various methods to contribute to activating the economy," Mr Suga told reporters, adding that it was "at present considering what kinds of policies, such as the Fiscal Investment and Loan Program, are feasible in the current financial situation."
The government is considering a 0.01 per cent interest rate on the loans, with some in the government proposing negative interest rates, the Nikkei said. While the Nikkei said a floor on rates had previously been set at 0.1 per cent, unprecedented monetary easing by the Bank of Japan has pushed yields on the 10-year government bond into negative territory.
Loans for projects may include extending high speed train lines or improving rail access to Tokyo's Haneda airport, as well as the provision of more facilities for the care of children and the elderly.
These would be organized through government affiliated entities such as the Development Bank of Japan, the paper said.
Last month Toshihiro Nikai, chairman of the ruling Liberal Democratic Party's General Council, urged more extensive use of interest rates effectively at zero to issue bonds for economic stimulus.
In a written proposal, he said more government spending was needed to spur the "explosive" increase in private sector spending required to escape deflation and trigger economic growth.