Yosano Says Stimulus Won't Hamper Japan's Budget-Balance Goal

By Toru Fujioka

Aug. 11 (Bloomberg) -- The Japanese government's forthcoming measures to stimulate the economy won't compromise its goal of balancing the budget by 2011, Economic and Fiscal Policy Minister Kaoru Yosano said.

``We're going to stick with the goal of balancing the budget by 2011,'' Yosano said at a news conference in Tokyo today. The government plans to release the relief package at the end of the month, Yosano said.

Prime Minister Yasuo Fukuda has little room to spur growth as long as he maintains his pledge to balance the budget by 2011 to reduce the world's largest public debt. The government should consider postponing the goal because the economy's longest postwar expansion may be over, Taro Aso, secretary-general of the ruling Liberal Democratic Party, said last week.

Yosano didn't rule out the possibility that the government will have to issue new bonds to pay for the relief measures.

The government last week said the economy is ``weakening'' for the first time since the most recent recession in 2001. Soaring material costs and weakening demand have eroded profits, prompting companies to pare manufacturing, investment and hiring. Production, household spending and exports declined in June, and the unemployment rate climbed to the highest in almost two years.

``The current economic situation is severe,'' Fukuda said today. ``It's affecting people's everyday lives, especially farmers, fishermen and small and mid-sized companies.''

The economy probably shrank for the first time in a year last quarter as exports declined and consumers spent less. Gross domestic product fell an annualized 2.3 percent in the three months ended June, economists predict a report will show Aug. 13.

The government in December allocated 215 billion yen ($2 billion) until March 2009 for oil relief. Crude oil has climbed 21 percent this year, and gasoline reached a record this month. Japan imports almost all of its oil.

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net