WASHINGTON (REUTERS) - Japan's "Abenomics" economic policies have led to a cheaper yen but only as a by-product of stimulus steps to pull the country out of deflation, Finance Minister Taro Aso said on Friday.
"To say that a cheap yen is our goal will grossly miss the point," Mr Aso said in a speech at the Centre for Strategic and International Studies (CSIS).
"The big D - deflation - is too difficult and too persistent to get rid of. We must to use every possible means (to beat it).
At the end of the day, a shrinking Japan can only do harm to the world," he said in Washington after attending the Group of 20 finance leaders' gathering.
Japan has come under criticism, mainly by some emerging economies, that its aggressive monetary easing steps are aimed at weakening the yen and giving its exports a competitive trade advantage.
Mr Aso, a skeet shooter who represented Japan for the 1976 Olympic Games, said he would rather call Prime Minister Shinzo Abe's three "arrows" of growth policies - bold monetary easing, fiscal stimulus and structural reforms - "bazookas" that are all needed to pull Japan out of chronic deflation.
"Deflation is like a slow-motion death, by losing temperature," he said. "It is already too late, when you have finally become aware, that you are a hostage, and that you cannot escape the vicious cycle."
The bold monetary easing steps undertaken by new Bank of Japan Governor Haruhiko Kuroda has helped weaken the yen and boost Tokyo share prices, Mr Aso said.
"It speaks volumes about how important it is to change people's perceptions, outlook and mindset," he said, describing Mr Kuroda's approach as "shock and awe" style.
But Mr Aso said the BOJ's huge bond buying must be accompanied by a credible fiscal reform plan by the government, to avoid losing market trust in Japan's finances and triggering an unwelcome spike in bond yields.
"The government must pursue fiscal prudence really hard," he said. "For us, fiscal prudence is not a task for the future. It is a clear and present one that we ought to start tackling now, rather than later," he said.
Japan's public debt, double the size of its economy, is the biggest among major industrialised economies, as a result of decades of massive fiscal spending to revitalise the economy.
That has put the onus of boosting growth on the BOJ.
Under Mr Kuroda - chosen by Mr Abe to pursue the first "arrow" of bold monetary easing - the BOJ unleashed an intense burst of monetary stimulus earlier this month, pledging to inject about US$1.4 trillion (S$1.73 trillion) into the economy in less than two years, a major shift from its previous incremental steps.
