Japanese Prime Minister Fumio Kishida on Friday announced a record $ 490 billion stimulus package for the world’s third-largest economy as he seeks to shore up the country’s uneven recovery from a pandemic.
The 56 trillion yen injection, the third since the Covid crisis hit last year, “is enough to give the Japanese people a sense of security and hope,” Kishida said.
The sweeping spending plans are expected to be approved by cabinet later today and would include cash and voucher distributions to families with children under the age of 18 who meet an income cap, as well as wage increases for those under the age of 18. nurses and orderlies.
It comes after the Japanese economy shrank much more than expected in the second quarter, as executives struggled to weather outbreaks of the virus by imposing lockdown measures in Tokyo and other cities.
Former prime ministers Yoshihide Suga and Shinzo Abe injected 40 trillion yen and 38 trillion yen respectively into the economy in 2020, although some analysts have expressed doubts about the effectiveness of the stimulus.
“We have been able to put in place economic measures that will lead to a new society after the pandemic,” Prime Minister Kishida said during political talks between the cabinet and the ruling coalition.
He said spending 56 trillion, or about 10 percent of Japan’s total GDP, is expected to reach 79 trillion yen, including other items such as loans from private funds.
Kishida triumphed in the general election last month, having pledged to implement a huge spending program following Suga’s resignation, in part because of his government’s response to the virus.
Businesses, especially restaurants and bars, have suffered months of restrictions on hours of operation and alcohol sales since the start of the pandemic. Japan’s borders also remain closed to tourists.
Government data this week showed the Japanese economy shrank 0.8% in the three months to September – much worse than market expectations – as a record increase in virus cases hit spending and that supply chain issues have hampered business.
However, daily cases have nosedived in recent months and more than three-quarters of the population are now fully vaccinated, with most restrictions now being lifted nationwide.
– “We need responsibility” –
Analysts said the stimulus would support Japan’s growth to some extent, but some questioned the aid’s effectiveness, with UBS warning that it was unlikely to “be a game-changer” for Japan’s economic outlook. country.
Japan already has a huge public debt, amounting to over 250% of GDP according to the International Monetary Fund.
Stimulus measures could “undermine Japan’s fiscal health” by increasing the debt burden, warned Yoko Takeda, chief economist at the Mitsubishi Research Institute.
“Kishida tried to show her leadership by quickly revealing the record for the record,” she told AFP.
“But its size overshadows the content. The package may not help stimulate spending and end up inflating people’s savings,” she added, alluding to fears that donations will be deposited rather than fed back into the fund. ‘economy.
Hideo Kumano, chief economist at the Daiichi Life Research Institute, was also skeptical.
“It’s a huge package but its impact on GDP seems limited,” he said.
“This policy of generosity and generalization does not necessarily lead to expenditure,” he told AFP.
The country’s Audit Council said nearly half of the stimulus measures already implemented by previous governments had yet to be used, Kengo Sakurada, chairman of the Japan Association of Business Executives, noted this week. ‘business.
“We need the government to be accountable for why this will be successful,” he told reporters.
Junichi Makino, chief economist at SMBC Nikko, said in a note that the package is expected to increase GDP by 3.3%.
He said a reduction program on domestic travel would likely have the most significant impact, along with subsidies for purchases and incentives for businesses.
“Package details will be key. The market will focus on the exact sizes of these high impact programs,” he wrote.
(Except for the title, this story was not edited by DAILYNEWSCATCH staff and is posted from a syndicated feed.)