Japan Presents Record USD 490 Billion Stimulus to Boost Pandemic Recovery.
Tokyo: Japanese Prime Minister Fumio Kishida announced a record $ 490 billion stimulus to the world’s third-largest economy on Friday, as he seeks to shore up the country’s uneven pandemic recovery.
The 56 trillion yen injection, the third since the Covid crisis broke out last year, “is enough to bring a sense of security and hope to the Japanese people,” Kishida said.
The comprehensive spending plans are expected to be approved by the cabinet later in the day and reportedly include cash brochures and coupons for families with children under 18 who meet an income limit, as well as salary increases. for nurses and care workers.
It comes after Japan’s economy contracted much more than expected in the second quarter as leaders struggled to overcome waves of viruses by imposing containment measures in Tokyo and other cities.
Former Prime Ministers Yoshihide Suga and Shinzo Abe poured 40 trillion yen and 38 trillion yen respectively into the economy in 2020, although some analysts have raised questions about the effectiveness of that stimulus.
“We have been able to build economic measures that will lead to a new society after the pandemic,” Prime Minister Kishida said in political talks between the cabinet and the ruling coalition.
He said the 56 trillion expenditures, about 10 percent of Japan’s total GDP, were expected to rise to 79 trillion yen, including other items such as loans from private funds.
Kishida triumphed in a general election last month, has promised to deliver a huge spending program after Suga resigned, in part due to his government’s response to the virus.
Businesses, especially restaurants and bars, have endured months of intermittent restrictions on opening and selling hours of alcohol since the pandemic began. Japan’s borders are also closed to tourists.
Government data this week showed Japan’s economy contracting 0.8 percent in the three months through September, far worse than market expectations as a record surge in virus cases hit spending and losses. Supply chain problems hampered business.
However, daily cases have plummeted in recent months, and more than three-quarters of the population are now fully vaccinated, and most restrictions have now been lifted across the country.
Analysts said the stimulus would support Japan’s growth to some extent, but some questioned the effectiveness of the donations, with UBS warning that it was unlikely to “change the rules of the game” for the country’s economic outlook.
Japan already has a huge public debt burden, amounting to more than 250 percent of GDP according to the International Monetary Fund.
The stimulus measures could “undermine Japan’s fiscal health” by increasing the debt burden, warned Yoko Takeda, the chief economist at the Mitsubishi Research Institute.
“Kishida tried to show his leadership by presenting the registration package quickly,” he told AFP.
“But its size dwarfs the content. The package may not help stimulate spending and only end up increasing people’s savings,” he added, alluding to fears that donations are being deposited rather than reinvested in the economy.
Hideo Kumano, the chief economist at the Daiichi Life Research Institute, was also skeptical.
“This is a huge package, but its impact on GDP seems limited,” he said.
“It is possible that this policy of distribution and generalized does not necessarily generate expenses,” he told AFP.
The country’s Board of Audit says that nearly half of the stimulus already implemented by previous governments has yet to be used, Kengo Sakurada, president of the Japan Association of Corporate Executives, said this week.
“We need the government to be held accountable for why this will be successful,” he told reporters.
Junichi Makino, the chief economist at SMBC Nikko, said in a note that the package should raise GDP by 3.3 percent.
He said a domestic travel discount program would likely have the most significant impact, along with shopping subsidies and business incentives.
“The details of the package will be the key. The market will focus on the exact sizes of those high-impact programs,” he wrote.
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