Reuters: US Dollar Report: UPDATE 1-Japan top policy panel sticks to fiscal reform targets

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UPDATE 1-Japan top policy panel sticks to fiscal reform targets Jun 6th 2013, 09:54 Thu Jun 6, 2013 5:54am EDT By Tetsushi Kajimoto TOKYO, June 6 (Reuters) - Japan will stick to its targets for fiscal consolidation to curb its massive public debt, the government's top macroeconomic policy panel said on Thursday, despite concerns that Prime Minister Shinzo Abe might back-pedal on the promises. The previous Democratic Party-led government had set targets of halving its primary deficit - the budget excluding new bond sales and debt servicing - by March 2016 and returning to surplus by March 2021. The Council on Economic and Fiscal Policy (CEFP) also said Japan aims to lower the country's debt-to-GDP ratio in a stable manner after achieving the primary balance target. Japan's public debt is already more than twice the size of its 500 trillion yen ($5 trillion) economy and any sign that the government was backing off on the fiscal reform targets or on its plan to double the five percent sales tax by October 2015 could make the Japanese government bond market nervous. Abe, who took office last December after his Liberal Democratic Party's (LDP) big election win, has made his "Abenomics" prescription for rescuing the economy from deflation and engineering sustainable growth his top priority. CEFP has legal authority to craft long-term fiscal and macroeconomic policies, and it issues policy guidelines around this time of the year, which will be reflected in an annual budget and other key policies. Financial markets have applauded the Bank of Japan's hyper-easy monetary policy introduced in April and the government's big spending. But a strategy for sustainable growth, the latest tranche of which was unveiled on Wednesday, left many investors longing for more details of how Japan would achieve its laundry list of ambitious targets. Abe's cabinet is set to approve the growth strategy and a macro-economic policy outline including the fiscal reform targets on June 14. Tokyo's Nikkei share average, which hit a 5-1/2 year peak on May 23, ended below 13,000 for the first time in two months on Thursday, finishing down 0.85 percent at 12,904.02 after a 3.8 percent slide on Wednesday. The Nikkei has now fallen 19 percent from its May 23 peak, verging on bear market territory and potentially putting a spanner in the government's ambitious plans to revive the economy. Yields on benchmark 10-year Japanese government bonds hit a 13-month high of 1.00 percent in late May, mostly on concerns that the U.S. Federal Reserve might slow its purchases of U.S. government bonds later this year. Yields have been holding within a range of 0.80-0.90 over the past week as the Nikkei came under selling pressure. Link this Share this Digg this Email Reprints

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