Proponent of Abenomics blasts Japan's tourism campaign as pandemic rages on

TOKYO (REUTERS) – Japan’s multi-billion dollar campaign aimed at reviving domestic tourism is ill-timed and not the best use of taxpayer money, said Professor Yutaka Harada, a former central bank board member and vocal advocate of Premier Shinzo Abe’s “Abenomics” policies.

Prof Harada, who served on the BOJ’s board until March, said that the central bank had taken sufficient steps to cushion the pandemic’s immediate blow to the economy, and that fiscal policy must now take a lead role in supporting growth.

“I’m not sure whether fiscal policy is doing the job right,” he told Reuters on Monday (Aug 3), criticising Mr Abe’s US$16 billion (S$22 billion) “Go To”tourism campaign to promote travel across the country.

“The purpose may have been to engineer a ‘V-shaped’ economic recovery once the pandemic is contained. By launching this campaign now, it risks causing a ‘V-shaped’ rebound – not just in the number of tourists but that of infections,” he said.

The campaign was launched to rescue Japan’s tourism industry, which has been hit hard as the coronavirus keeps foreign visitors at home.

Mr Abe excluded Tokyo from the programme as record numbers of infections in the capital sparked concern the virus could spread to other areas.

Prof Harada joined the BOJ board five years ago as a proponent of Abenomics, a policy deployed in 2012 to end deflation with a mix of bold monetary policy, fiscal measures and structural reforms.

But inflation remains far off the BOJ’s 2 per cent target, while the pandemic is threatening to wipe out the benefits of Abenomics by hitting jobs, corporate profits and tourism.

If further monetary easing were needed, the BOJ could ramp up bond buying or cut interest rates, including pushing short-term rates deeper into negative territory, Prof Harada said.

“If the economy starts to recover, long-term rates may rise a bit. If so, the BOJ could increase bond purchases,” said Prof Harada, who is now professor at Japan’s NUCB Business School.

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