[interview] How to promote Japan's Fiscal Reform.

Hiroyasu Watanabe: President of the Policy Research Institute, Ministry of Finance

Born in 1945, graduated from Princeton with a graduate degree in public economics.

1. When we consider Japan's current fiscal reform, we must take a cautious approach in understanding the present Japanese economy. We cannot accelerate Japan's fiscal reconstruction in a vacuum, it might need at least several decades to achieve it by reforming the nation's economy as a whole, including appropriate macroeconomic measures. I would like to ask your opinion.

2. Japan's current fiscal situation shows that its international accounts have remained in surplus and its domestic funds can absorb government bonds. If this is the case, we may able to write a scenario in which the government must establish confidence in order to stabilize interest rates in the market, accelerate structural reform of the economy, and promote fiscal reconstruction. What is your opinion?

3. You proposed three ideas in your monograph. In short, first, Japan's budget debts should be regarded as gross, not the net, amount. Second, fiscal policies do not work efficiently when there is cumulative issuance of government bonds. Third, it may take at least 10 years or more than 10 years to eliminate the budget debts. Could you explain your ideas?

4. If we are to reconstruct the nation's finances, we are required to undertake the recovery of the primary balance, stabilize the average procurement interest rate and the nominal growth rate. What do you think about the combination of these items?

5. In the present market conditions of recession the market should consider abolishing the limits of 30 trillion yen on the government bonds issuance. The long-term interest rate is gradually on the rise because the market fears the failure of government policies and the economy. I think the government first needs to recover economic stability. Although operating the economy at this stage is difficult, I hope that the government will make its best effort to create a middle and long-term recovery program so that Japan's economy will not be at the mercy of the current situation.