Japan government plans to produce $92 billion stimulus package to incite economic growth

02.12.2019 - Davydova Maria
Japan government plans to produce $92 billion stimulus package to incite economic growth

The Japanese government is planning to create a large-scale economic stimulus package with more than $92 billion in fiscal spending. This measure comes as uncertainties in the US-China trade deal and weakened global demand affected Japan’s still recovering economy.

Prime Minister Shinzo Abe’s administration will issue more bonds of up to 4 trillion yen ($36.82 billion) to fund public works and make up for tax revenue deficits.

The economic stimulus package is set to be produced next week once finalized in consultation with the government’s coalition, Nikkei said.

Japan’s finance ministry officials were not available for comment.

Lawmakers from the ruling party have been putting pressure on the government to produce a big spending package, which in turn will raise the chances of bigger role of fiscal policy in the economic growth despite risks of larger debt issuance.

Haruhiko Kuroda, governor at Bank of Japan, said that the central bank aims to hit its price target and not to fund government spending. Kuroda also warns against complacency in getting the fiscal house in order.

The package proposes a fiscal spending of more than 10 trillion yen, which will be funded by next year’s annual budget and this fiscal year’s supplementary budget.

The amount will approximately match 2016’s 13.5 trillion-yen spending package when news of Britain exiting the European Union hit the market, especially Japan which economy heavily relies on export.

The package that is yet to be finalized includes fund for infrastructure building, disaster relief, and various measures to aid companies in boosting productivity.

Japan is also going to issue more deficit-covering bonds, as the current fiscal year’s tax revenues will fall short of its initial estimate of 2 trillion yen.

The government will provide financing for companies to use for overseas investment as a way to create a diversified production.

Japan’s economic growth dropped to its weakest in the third quarter this year due to weakened demands that affected exports and solicited fears of an economic recession. Analysts also fear that a tax hike in October might weaken private consumption.

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