Japan sees withdrawing economic stimulus 'premature'

Japan believes it is still "premature" to withdraw economic stimulus as the nation's historically high level of unemployment and weak exports cast doubts over prospects for a steady recovery from its worst recession in decades, the Japanese senior vice minister of financer.

In a speech at a two-day annual meeting of the International Monetary Fund and the World Bank in Istanbul, Senior Vice Finance Minister Naoki Minezaki said although the Japanese economy is showing signs of recovery, it is still necessary to "cautiously" monitor economic developments and continue appropriate fiscal and monetary policies.

"While it is necessary to discuss exit strategies, at this moment, their implementation is still premature," Minezaki said yesterday.

Japan's economy expanded for the first time in five quarters in the three months to June and industrial output rose 1.8 per cent in August from the previous month, for the sixth consecutive month of growth. But the nation's unemployment stands at 5.5 per cent in the same month, just a shy of a record -high 5.7 per cent logged the previous month, and exports were 36 per cent smaller than a year earlier.

Minezaki also said Japan's new government will shift its economic policy to put more emphasis on boosting private demand, rather than the conventional spending focused on public investment, while also accelerating efforts for fiscal consolidation.