UPDATE 1-Japan bank min urges stimulus, markets shrug

(For more stories on the Japanese economy, click [ID:nECONJP])

* Kamei: Need new economic steps as stimulus petering out

* JGBs dip on recent data, analysts say selling likely over

* Markets do not expect large stimulus given huge public debt
(Adds comments, more backgrounds)

TOKYO, March 19 (BestGrowthStock) – Japan’s outspoken banking
minister Shizuka Kamei called again on Friday for fresh stimulus
to boost the economy, but analysts said big spending was unlikely
given the government’s need to limit debt issuance.

The government has just upgraded its economic assessment for
the first time in eight months and is keen to contain any further
rise in bond issues as the national debt is already roughly twice
the size of the country’s gross domestic product. [ID:nTKF106890]

Kamei, the leader of a tiny coalition party, has been calling
for another large-scale stimulus package, but Prime Minister
Yukio Hatoyama has said there are no such plans in the works.

The banking minister said on Friday that a key land price
survey released the previous day showed that the country had not
pulled out of deflation. [ID:nTKC005762]

“What we need is not just piecemeal policies. We need a
policy that will galvanise the whole economy. Otherwise land
prices will keep falling,” he told a news conference.

Japanese government bonds largely brushed off his comments.
Prices nudged lower on recent data suggesting the economy will
keep improving gradually, but analysts said the selling may have
mostly petered out. [JP/]

Hatoyama’s Democratic Party of Japan (DPJ), while holding a
massive majority in parliament’s powerful lower house, lacks a
majority in the upper chamber, which can stall legislation. That
means he needs the backing of Kamei’s party.

Both parties want to look proactive on the economy ahead of
an upper house election expected in July, especially as public
support for Hatoyama’s government has been slipping steadily
since he took office six months ago.

Kamei delayed government work on an extra budget for the
current fiscal year ending this month with demands for more
spending, but he ended up winning only a marginal increase in the
size of the package.

He has also called for the Bank of Japan to directly buy
government bonds to finance the government’s deficit spending,
but Finance Minister Naoto Kan has rejected such an idea.

Financial markets have tended to shrug off Kamei’s comments
as few investors think his ideas will be taken up by a government
that is worried about being seen as lacking fiscal discipline.

“Extra stimulus measures are possible as there is an election
this year, and that could put some upward pressure on yields,”
said Tetsu Aikawa, deputy general manager of capital markets at
Shinsei Bank in Tokyo.

“But the reality is the government can’t increase bond
issuance, so any measures they take are likely to be small and
have little economic impact. Yields will eventually move lower.”
Investment Research

(Reporting by Noriyuki Hirata and Stanley White; Writing by
Hideyuki Sano; Editing by Hugh Lawson)

UPDATE 1-Japan bank min urges stimulus, markets shrug