Prime Minister Junichiro Koizumi and Finance Minister Masajuro Shiokawa said Monday the government should maintain its self-imposed policy of capping the issuance of new government bonds at 30 trillion yen a year.
"Should it be allowed, I would also like the government to boost bond issues to stimulate the economy. But that would entail adverse side effects, which we should avoid," Koizumi told the House of Representatives Budget Committee.
Koizumi said the government would be flexible if risks of a deflationary spiral or a major global economic crisis emerge. "But we are not in the middle of such a synchronized global depression," he said.
Shiokawa told the committee the government needs to maintain its cap to offset rising public-sector debt.
"For any household or company, it is out of the question to accumulate debts equivalent to nearly 60 percent of total revenues," Shiokawa said, referring to outstanding government bonds that account for nearly 60 percent of gross domestic product.
Shiokawa said there are growing signs ministries and agencies are becoming more serious about spending cuts following the introduction of the borrowing cap.
Koizumi also said people should not be overly worried about the current situation as the economy is just going through a major transitional phase.
"Although we are in a severe situation, we should not be too pessimistic," he said.
The House of Representative is expected today to pass a 3 trillion yen extra budget for the current fiscal year. The extra budget bill will immediately be sent to the House of Councilors.