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ISTANBUL : The International Monetary Fund welcomed on Sunday the new Japanese government's plan to use stimulus funds to boost social spending, saying it would bolster much-needed private demand.
"We certainly welcome the government's intentions to improve public sector efficiency in a way that will allow them to reform social spending in a way that's going to raise imports and demand," Anoop Singh, director of the IMF's Asia Pacific department, said at a news conference in Istanbul ahead of annual meetings of the IMF and the World Bank.
Japan's centre-left Prime Minister Yukio Hatoyama, who took office last month after his Democratic Party of Japan won a landslide election victory that rejected the long-dominant conservative Liberal Democratic Party, pledged to freeze part of his predecessor's supplemental budget to put more money into the pockets of ordinary people.
Former premier Taro Aso in May pushed a supplementary budget through parliament to fund economic stimulus measures.
Singh said it was "too early" to assess the economic impact of the new government's plan to reallocate a portion of the stimulus budget, which has yet to be presented to the legislature. The spending plan would provide cash allowances for families, free high-school education and eliminate highway tolls.
Japan as well as others in the region "recognize the importance of developing new drivers of growth," Singh said.
The Japanese economy, the second biggest in the world, was hard hit by the global economic crisis because of its heavy dependence on exports.
The economy returned to positive growth in the April-June period after a year-long recession as exports improved, but deflation is deepening amid weak domestic demand, while a strong yen is threatening exports.
The IMF projects the Japanese economy will grow 1.7 percent in 2010, following a brutal 5.4 percent contraction in 2009.
The Japanese finance minister, Hirohisa Fujii, said "the economy is going to be driven by domestic demand," after talks with his counterparts in the Group of Seven richest countries on Saturday.
- AFP /ls
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