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Japan urges G20 members with fiscal scope to boost spending

Japanese Finance Minister Taro Aso takes questions from reporters at the annual meetings of the International Monetary Fund and World Bank in Washington

By Leika Kihara

RIYADH (Reuters) - Japan called on G20 countries with fiscal space to ramp up spending to help the global economy weather risks, including the fallout from the coronavirus outbreak, Finance Minister Taro Aso said on Saturday.

The epidemic has cast a cloud over global recovery prospects, overshadowing a meeting of finance leaders of the world's top 20 economies that began in Riyadh on Saturday.

"I told the G20 ministers that the spread of the coronavirus epidemic ... could have a serious effect on the global economy," Aso told reporters after attending the first day of the G20 meeting that included discussions on the world economy.

"I expressed Japan's hope that countries with fiscal space take bold policy measures," he said, without identifying which countries he was referring to.

Germany has been identified as among countries that could ramp up fiscal stimulus to boost growth, though it had long resisted doing so due to concern of allowing lax spending.

A Japanese finance ministry official later said Aso was not singling out Germany in calling for more fiscal spending, and that there were other countries that had scope to spend more.

"The minister just wanted to say Japan has deployed fiscal spending quite a bit, so wants other countries with fiscal room to do the same," the official told reporters.

Speaking about Japan's economy, Aso said it continued to recovery moderately as a tight job market and rising household income offset some of the weaknesses in exports and output.

"At this stage, I don't think risks to Japan's economy have suddenly heightened sharply," Aso said, when asked whether the virus outbreak could push Japan into recession. He declined to comment when asked about the yen's recent weakness.

Bank of Japan Governor Haruhiko Kuroda said earlier on Saturday that the yen's recent declines were largely driven by a strong dollar, shrugging off some market views the epidemic is triggering an outflow of funds from Asia.

Japan's economy shrank at its fastest pace in nearly six years in the December quarter, as soft global demand for Japanese cars and machinery and last year's sales tax hike hurt domestic consumption and business spending.

Some analysts expect the economy to contract again in the current quarter, dashing the BOJ's hope that an expected rebound in global growth in the middle of the year would underpin Japan's fragile recovery.

(Reporting by Leika Kihara; Writing by Ghaida Ghantous, Editing by William Maclean and Alex Richardson)