The Japanese government gave the green light to a fiscal stimulus package worth JPY 3.5 trillion or USD 29 billion to reverse the decline of the national economy. The attempt at an economic boost comes after consumption slowed down in April due to the increase in the country’s sales tax.
‘Support Private Consumption’
In the past, Japanese Prime Minister Shinzo Abe had said many times that economic growth is his primary goal for the country. But as far as the experts see it, changes need to be made before the nation gets back on track. Last November alone, Japan saw its total output and retail sales slide – another piece of evidence to prove the weakening Japanese economy.
For Abe, the stimulus package is a step towards the right direction.
“This will support private consumption and boost regional economies, so that the virtuous economic cycle spreads to all corners of the nation,” the Prime Minister said in Tokyo.
The Japanese government had released plans as to where the package would go.
Around half of the stimulus package (JPY 1.7 trillion) will be allocated to public works and infrastructure. This aims to fast-track any ongoing repairs in areas ravaged by natural disasters, as well as improve the country’s disaster preparedness as a whole.
Regional economies would also receive a boost amounting to JPY 600 billion. As for the remaining JPY 1.2 trillion, the Cabinet Office said that this amount will serve as an aid for people and businesses who had felt the impact of the current economic condition.
Measures to help alleviate the economy include low interest loans for small businesses, shopping vouchers for consumers, and discounted heating fuel for the poor. Economy Minister Akira Amari estimated that the package will boost the gross domestic product by as much as 0.7%.
The government will source the budget from unspent funds for the current fiscal year. Finance Minister Taro Aso clarified that the package would not require a new issuance of bonds, as the tax revenue would be enough.
Experts attribute the current economic situation to the delayed hike in sales tax by a year and a half, which was a move by the Prime Minister after Japan experienced a recession. This cut the GDP by an annualized rate of 1.9%, a figure larger than what was expected.
Analysts, however, are hopeful that the package will help breathe new life into the Japanese economy. SMBC Nikko Securities Inc. fiscal analyst Hidenori Suezawa said, “Coupled with the delay of the sales tax hike, the package will be large enough to stimulate consumption.”