Private-sector members of the Council on Economic and Fiscal Policy have recommended utilizing the surplus from the nation's foreign exchange special account for upcoming budget needs. The account has expanded due to interest earnings and yen depreciation inflating the value of U.S. Treasuries, despite Japan spending 15 trillion yen on currency interventions between July and August. Drawing on these funds could bankroll a proposed two-year consumption tax cut on food estimated at 5 trillion yen annually. While advisers emphasized non-tax revenues for the fiscal year starting April 1, they cautioned against entirely abandoning supplemental budgets during unforeseen economic shocks.
Key points
Government advisers believe the foreign exchange special account maintains adequate safet…: Government advisers believe the foreign exchange special account maintains adequate safety buffers to withstand sharp currency fluctuations.
Utilizing reserve surpluses offers a viable mechanism to fund state initiatives without w…: Utilizing reserve surpluses offers a viable mechanism to fund state initiatives without worsening national debt levels or destabilizing bond yields.
Economic panel members recommend that the administration should not entirely rule out ext…: Economic panel members recommend that the administration should not entirely rule out extra budgets if severe economic shocks arise.
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TOKYO, Oct 29 : Japan can tap more of the huge surplus in its foreign exchange special account to fund spending, private-sector members of a key government panel said on Thursday, arguing it already has sufficient buffers to withstand sharp moves in the yen.
The proposal, made at a meeting of the Council on Economic and Fiscal Policy, comes as policymakers debate ways to secure funding for tax cuts and spending plans without adding to the country's already huge debt pile.
Japan should "accurately assess and secure" non-tax revenues and money left unused from state funds, the members said in a proposal that lays the groundwork for the government's budget drafting for the next fiscal year starting on April 1.
The surplus in Japan's foreign exchange special account, in particular, should be "actively used" as a source of funding for spending, the proposal said.
Japan holds roughly $1.2 trillion in foreign reserves, which include US Treasuries, in a special account that is used to conduct currency intervention.
The surplus in the account has increased due to the yen's depreciation, which…
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