Japan PM says stimulus spending not 'forever' ahead of budget

TOKYO (AFP) - Japanese premier Shinzo Abe pledged today he would not keep stimulus spending "forever" in a policy speech ahead of a budget that will raise more in taxes than it does from borrowing.

Mr Abe's plan to overturn four years in which the majority of money the government spends is raised from selling bonds came as an opinion poll showed he has enjoyed a boost in popularity since coming to power last month.

"We can't continue fiscal spending forever," he told parliament at the opening of a new session. "We will draw up and implement a growth strategy that will see private investment and consumption grow sustainably."

"The greatest and most urgent challenge for our country is revival of the economy. We can't exit from deflation and from a high yen by keeping the past measures. Therefore I present a bold policy package," he said.

The policy speech comes after his government announced a US$226.5 billion (S$280 billion) stimulus package earlier this month, raising concerns over the level of Japan's already-towering public debt.

In his first policy speech since taking office in December, Mr Abe repeated his "three arrows" of economy policy: aggressive monetary easing, flexible fiscal spending and a growth strategy that would induce private investment.

Japan's budget for fiscal 2013 starting April will likely stand at 92.61 trillion yen (S$1.3 trillion), with revenue estimated at 43.10 trillion yen and new bond issuance at 42.85 trillion yen - the first time in four years revenue surpasses new bond issuance, major newspapers reported Monday.

Under the budget plan, spending on defence will increase by 40 billion yen, the first rise in 11 years, which comes against the backdrop of a lingering territorial row with China over the sovereignty of a chain of islands in the East China Sea.

A survey published today by the business daily Nikkei showed public support for Mr Abe rose by six percentage points to 68 per cent from late last month, just days after Mr Abe's cabinet was launched.