JAKARTA (TheInsiderStories) – Japanese Prime Minister Shinzo Abe launched US$120 billion in stimulus measures on Thursday (12/05), to support stalling growth in the world’s third-largest economy amid offshore risks and as policymakers look to sustain activity beyond the 2020 Tokyo Olympics investment spurt.
“We will introduce a daring fiscal policy worth ¥13 trillion ($120 billion). We have crafted a powerful policy package,” Abe told ministers and party leaders at the prime minister’s office.
The strong package based on three pillars of ensuring disaster rebuilding and safety, providing intensive support to overcome downside economic risks and sustaining economic vitality after the Tokyo Olympics, the minister explained.
The package, expected to be endorsed at a cabinet meeting later in the day, totals some 26 trillion yen if spending by the private sector is counted, according to public broadcaster NHK and other local media.
Under the plan, the government will spend some ¥6.0 trillion on a public investment after a series of natural disasters – including killer Typhoon Hagibis – caused huge damage to the country’s infrastructure, local media said.
Japan’s economy ground to a near halt in July-September as the global slowdown knocked exports. Retail sales also tumbled at their fastest pace in more than 4-1/2 years in October as a sales tax hike, partially because of strong demand related to preparations for the Olympics, which will start in July next year. Some analysts warned the country may suffer a post-Olympic slump.
The package is also aimed at easing the impact of the consumption tax increase to 10 percent from eight percent on Oct 1 and helping Japanese firms prepare for a global economic slowdown due to the United States-China trade dispute.
Among other steps, the government will help people in their 30s and 40s, who have been struggling to find work due to past economic slowdowns, to land new jobs, it said.
The ¥13 trillion includes more than ¥3.0 trillion from fiscal investment and loan programs, as the heavily indebted government seeks to take advantage of low borrowing costs under the central bank’s negative interest rate policy.
The spending will spread over a supplementary budget for this fiscal year to March and an annual budget for the coming fiscal year from April, both to be compiled later this month.
The stimulus package is smaller than the last major package compiled in 2016, worth ¥28 trillion when the Brexit vote darkened Japan’s export outlook. To strike the balance between spurring growth and maintaining fiscal discipline, Tokyo will steer clear of fresh deficit-covering bond issuance, the Nikkei business daily reported this week.
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