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UPDATE 1-Japan says to implement flexible policy if economic risks materialise

Kitco News

(Updates with release of roadmap)

By Takaya Yamaguchi and Stanley White

TOKYO, June 11 (Reuters) - Japan's government is set to raise the sales tax as planned in October, while it stands ready to take flexible macroeconomic policy steps in case risks to the economy materialise, a mid-year policy roadmap released by the government said on Tuesday.

The roadmap, which will be formally endorsed by Prime Minister Shinzo Abe's cabinet later this month, also said the government will make "all policy tools" available to help the world's third largest economy sustain a recovery trend.

"We have clearly stated that we will not hesitate to react if there are risks to the economic outlook," Economy Minister Toshimitsu Motegi said on Tuesday.

The roadmap released by the government was the same as a draft obtained by Reuters earlier on Tuesday.

The mid-year policy guidelines underscored a balance Abe's government needs to strike between achieving growth and fiscal reform, at a time when an intensifying Sino-U.S. trade war and global slowdown threaten to derail Japan's export-led economy.

"We need to closely watch external developments including trade issues, with exports and output showing weakness despite a gradual recovery seen in Japan's economy," the guidelines said.

China's economy is slowing and some parts of Europe are showing weakness, it added.

If external risks materialised, that could cause Japan's economic recovery to falter, it said.

On monetary policy, the draft guidelines said the government expects the Bank of Japan to promote easing in order to achieve a 2% inflation target "as early as possible".

(Writing by Tetsushi Kajimoto; Editing by Simon Cameron-Moore and Darren Schuettler)

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