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Source: Reuters

INTERVIEW-UPDATE 1-Japan opposition says can boost growth 2 pct

Published: 31 Jul 2009 00:32:06 PST

TOKYO, July 31 - Japan's main opposition Democratic Party, which stands a good chance of winning next month's election, said on Friday its policies will raise economic growth by two percentage points in the fiscal year from April 2012.

The Democratic Party of Japan has vowed in the run-up to the Aug. 30 poll to hand out 26,000 yen ($273) a month per child to parents of school-age children, abolish Japan's expensive highway tolls and scrap a surcharge on gasoline.

"We have calculated, for example, the child care allowances will boost GDP (growth) by 1 percentage point," the Democrats' policy chief Masayuki Naoshima said in an interview. "The free highways and gasoline tax cut of 2.5 trillion yen ($26 billion) will each boost it by 0.5 percentage points, by a simple calculation," he added.

His office later confirmed that the effect on GDP was expected in the fiscal year starting in April 2012, because the spending plans are to be introduced in steps.

A recent Reuters poll showed economists expected Japan's economy to grow 0.7 percent in fiscal 2010/2011. Economic figures issued on Friday were gloomy, with unemployment at a 6-year-high of 5.4 percent, indicating the job market will take time to recover from a deep recession.

For a person on an annual income of 4 million yen, the DPJ's policies will boost disposable income by about 20 percent, Naoshima said.

The long-ruling Liberal Democratic Party (LDP) is set to unveil its own manifesto later on Friday. Media reports say it will promise to achieve economic growth of 2 percent by the second half of the fiscal year starting in April 2010.

The LDP also says it plans to raise household disposable income by an average of at least 1 million yen by 2020, partly by making pre-school education free, media reports say, a policy that echoes the Democrats' emphasis on helping families.

"Making pre-school education free was in their manifesto four years ago," Naoshima said. "They haven't brought it into practice. So we need them to explain why," he said.

"The LDP is coming closer to what we have been saying all along," Naoshima added. "We knew that would happen."

The ruling LDP has accused the DPJ of failing to explain how it will fund the proposals in its manifesto, but Naoshima said such accusations were unjustified.

"If we continued the policies they have and added the Democrats' policies on top, then we would not have enough funds," he said. But he added that the Democrats planned to examine all existing spending, cutting back in areas they consider wasteful.

"We have the funds, it's just a question of prioritisation," he said.

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