Japan pledged on Friday to conquer deflation in the year from next April and boost the economy in coming years by ramping up spending in growth areas, as it shifts policy gears to fix its tattered public finances.The government unveiled its growth strategy less than a week before it is due to announce plans on how to tackle its massive debt and ahead of upper house elections on July 11, and is hoping to win the public's confidence in its ability to steer the world's second largest economy.By stimulating demand in clean energy and other areas with growth potential, the government aims to lift real economic growth to more than 2 percent on average and nominal growth to 3 percent over the next 10 years.But the plan met with scepticism from some investors."The growth targets don't sound like anything new to me, just wishful thinking," said Junko Nishioka, chief economist Japan at RBS Securities.Nishioka said the growth targets are hard to meet given that Japan's real growth rate hovered at 1.3 percent on average in the decade before the global financial crisis.Others say it is unclear how much impact the growth strategy will have on the economy as it lacks details."The point is whether the government will be able to show a detailed scenario to achieve such goals to gain market confidence, said Yoshiki Shinke, a senior economist at Dai-ichi Life Research Institute."I cannot make a comprehensive assessment until the government unveils more details, and it must do so quickly."Prime Minister Naoto Kan, who has made fiscal reform a top priority since taking office last week, said on Thursday that "without a strong economy, a strong public finance and a strong social security system would not be possible".He said that doubling the 5 percent sales tax was an option to curb the country's massive debt, that is about twice the size of the economy.The government also said the effects of policies for boosting demand and jobs would be maximised if the public shoulders the costs of expanding social welfare.The government is expected to unveil on June 22 a medium- and long-term plan to rein in bulging public debt.WANTS BOJ EFFORTS ON DEFLATIONThe government in its economic growth strategy called on the Bank of Japan to "do its utmost" to beat deflation and said fiscal and monetary policies for ending price falls should help the country avoid excessive rises in the yen.It will aim to achieve stable inflation rates in the next two years and end for good the deflation that has plagued the country for much of the past 20 years.The government also pledged to lower the country's corporate tax rate, now around 40 percent and one of the highest among industrial countries, by stages to the rates in major countries, or around 25 percent. But it stopped short of setting a time frame.It also mapped out various steps for capitalising on fast-growing demand in Asia, such as creating a market worth 19.7 trillion yen ($217 billion) for its overseas infrastructure projects and boosting revenues from sectors such as fashion and films to 1 trillion yen.The government will also consider introducing tax breaks and other incentives to prompt overseas companies to relocate their Asian headquarters to Japan, as well as setting up globally competitive industrial zones that offer deregulation and tax incentives.The government plans to boost the market for renewable energy such as solar power to 10 trillion yen by 2020.In the financial sector, it aims to create a comprehensive exchange for trading securities, commodities and other financial products by fiscal 2013/14.The BOJ earlier this week detailed its new loan scheme aimed at beating deflation over the longer term, saying it would provide up to 3 trillion yen to industries with growth potential.Japan's economy pulled out of the worst recession in decades in April-June last year and its growth in the first quarter of this year outpaced that of Europe and the United States.But because of anaemic domestic demand, core consumer prices marked their 14th straight month of annual decline in April.(Editing by Kazunori Takada)(For more business news on Reuters India click http://in.reuters.com)News posted by www.newsinfoline.com
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