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June 28, 2017

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Japan's politicians struggle to address economic problems

TOKYO -- Liberal Democratic Party (LDP) leader Shinzo Abe captured the headlines soon after the dissolution of the lower house last month as he called for aggressive monetary easing to counter deflation in Japan.

Abe, who served as premier for a year until September 2007, said, if the main opposition party regained power in Sunday's election, he would immediately work on economic stimulus, including a proposal for "unlimited" easing measures by the Bank of Japan to stem the yen's rise and raise inflation to 2 to 3 percent.

Abe, whose party is leading in the polls, said his government would issue construction bonds and have the bank purchase them.

Prime Minister Yoshihiko Noda dismissed Abe's suggestion as "absurd."

Masaaki Shirakawa, the bank's governor, expressed concerns about Abe's proposal. A price inflation goal of 3 percent was "unrealistic," he said, and would have a negative impact on the economy.

A direct purchase of construction bonds by the central bank "will have major adverse effects not only on fiscal reconstruction but also on the real economy," Shirakawa told reporters.

But the governor defended the bank's policy announced in October to expand an asset-purchase program to about 91 trillion yen (US$1.11 trillion) from 80 trillion yen to prop up the economy.

He has also advocated measures such as "decisive deregulation to raise the attractiveness of domestic investment and lay the foundations that encourage firms to be adventurous."

Critics said both Noda and Abe have downplayed the government's sales-tax hike and the increasingly divisive issue of nuclear energy.

The nation's 54 nuclear reactors were built across the country under the LDP's watch.

The tax-hike legislation was passed with the help of the LDP and the New Komeito, backed by Japan's largest lay Buddhist organization Soka Gakkai. Noda's ruling Democratic Party of Japan (DPJ) is facing public criticism as the hike went against his party's election pledge three years ago.

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