TOKYO (Nikkei)--The Japanese government and Bank of Japan must take further steps to revive the economy and end deflation, said two leading Tokyo-based economists at the first English-language Nikkei.com Seminar in Tokyo Friday evening.

Robert Feldman, director of the economic research department at Morgan Stanley MUFG Securities Co., said the combination of monetary, fiscal and structural policies is important. He said that the BOJ's new measures, announced Oct. 5, are insufficient to end deflation, and that the additional 5 trillion yen (60.9 billion dollar) expansion of the emergency fund has to be 10 times larger.

He concluded the central bank alone cannot solve the problem and said, "We need a much more aggressive structural reform policy, much more aggressive fiscal reform policy."

Masaaki Kanno, chief economist at J.P. Morgan Securities Japan Co., agreed that the BOJ has "no tool to overcome deflation."

But he called the creation of the emergency fund to purchase financial assets a "unique decision," and said the central bank is trying "not to directly affect demand but rather to affect asset prices." He pointed out that the continuing fall in asset prices, especially land prices, over the past 20 years is the main problem with the Japanese economy.

Kanno warned, however, that the BOJ policy is "creating a new bubble" in the Japanese government bond market and holding the bonds can be "very risky."

Strong yen a strength

As for the yen's strength relative to the dollar, Kanno showed a chart of the real effective exchange rates of the dollar, euro and yen since 1980 and explained that the three currencies are now close to a historically neutral level.

"The price of a (McDonald's) Big Mac in Tokyo, New York and Paris is the same," he said.

He said that because the yen's strength will help Japanese companies expand business globally, "it can be a trigger to change the Japanese export-oriented business model."

Meanwhile, Feldman was critical of the new 5.05 trillion yen economic stimulus package.

"This type of package is exactly what the LDP did all the time," he said, referring to similar packages introduced in the 1990s.

He called for a "much more aggressive structural policy" and said the money being spent on the growth strategy, including to raise productivity in the agricultural sector, is "very little."

Kanno said that to improve efficiency, competition of a global standard is needed within Japan, citing the country's nine electric companies. He said that by allowing foreign firms to compete in Japan, "we will have a different type of competition and easily see the winners and losers (in the market)."

The two economists discussed various issues with the some 70 mostly non-Japanese participants of a wide range of occupations.

On the question of how many immigrants should be allowed into Japan, Feldman said 10 million could be the minimum over the next 15 to 20 years. He said Chinese and Indian nationals are the two most successful immigrant groups in Japan.

Kanno said immigrants will be needed in several fields, citing the urgent need for care workers to look after the elderly.

He joked that good-looking foreigners could be the answer to Japan's low birth rate.