Japan green lights US$182b in spending
Print Edition
Japanese Prime Minister Shinzo Abe’s Cabinet approved a US$182 billion package yesterday to pull the economy out of deflation, but doubts remain about the impact.
The package has a headline value of 18.6 trillion yen (US$182 billion), which is an exaggerated figure as the bulk of the package includes loans from government-backed lenders and spending by local governments that was already scheduled.
The core of the package is 5.5 trillion yen in spending measures which Abe ordered in October to bolster the economy ahead of a national sales-tax hike in April. The government does not have to sell new debt to fund this spending.
The package has raised concerns that Japan’s government has not broken away from the stop-gap measures and piecemeal policy making some say has hampered long-term growth.
“Market participants want the government to focus even more energy on economic policy,” said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities.
“Some of these items, like reconstruction from the earthquake, were already scheduled and don’t really constitute an economic strategy.”
The measures approved yesterday will add 1 percentage point to gross domestic product and create around 250,000 jobs, according to the Cabinet Office.
There is a consensus the sales tax hike will subtract about 2 trillion yen from gross domestic product, so 5.5 trillion yen in spending should more than compensate, said Yasutoshi Nishimura, a senior vice minister at the Cabinet Office.
Miyazaki was less optimistic, saying the measures may only contribute around 2 trillion yen or 0.4 percentage point as a lot of the direct government payouts to the elderly and families will go straight to savings.
The steps approved include measures to boost competitiveness; assist women, youth and the elderly; accelerate reconstruction from the March 2011 earthquake and tsunami; and build infrastructure for the 2020 Tokyo Olympics.
“This includes steps to boost capital expenditure for the future and ensure the economy stays in a positive cycle,” Abe said in a speech about the stimulus to businessmen and economists.
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