Japan preparing $120bn stimulus package to bolster fragile economy

Author: 
Reuters
ID: 
1575358654166701600
Tue, 2019-12-03 07:27

TOKYO: Japan is preparing an economic stimulus package worth
$120 billion to support fragile growth, two government officials
with direct knowledge of the matter said on Tuesday, and
complicating government efforts to fix public finances.
The spending would be earmarked in a supplementary budget for this
fiscal year to next March and an annual budget for the coming
fiscal year from April. Both budgets will be compiled later this
month, the sources told Reuters, declining to be identified because
the package has not been finalized.
The package would come to around 13 trillion yen ($120 billion),
but that would rise to 25 trillion yen ($230 billion) when
private-sector and other spending are included.
The Nikkei business daily reported on the weekend that the
government was considering putting together a large-scale stimulus
package with fiscal spending exceeding $92 billion.
Japan’s economic growth slumped to its weakest in a year in the
third quarter as soft global demand and the Sino-US trade war hit
exports, stoking fears of a recession. Some analysts also worry
that a sales tax hike to 10% in October could cool private
consumption which has helped cushion weak exports.
Such spending could strain Japan’s coffers — the industrial
world’s heaviest public debt burden, which tops more than twice
the size of its $5 trillion economy.
Despite the headline size of the stimulus, actual spending would be
smaller in the current fiscal year, and economists are not
expecting much of a boost.
“We expect this fiscal year’s extra budget to total around 3-4
trillion yen. We should not expect it to substantially push up the
GDP growth rate,” said Takuya Hoshino, senior economist at
Dai-ichi Life Research Institute.
The 13 trillion yen includes more than 3 trillion yen from fiscal
investment and loan programs, as the heavily indebted government
seeks to take advantage of low borrowing costs under the Bank of
Japan’s negative interest rate policy.
Direct government spending is expected to reach around 7-8 trillion
yen, they said.
The government will mobilize construction bonds, unused money from
the previous fiscal year’s budget and fiscal investment and loan
programs to secure necessary funding, the Nikkei reported on
Tuesday.
The spending package won’t involve deficit-covering bond
issuance, the Nikkei added.
A final decision on the package could be made as early as
Thursday.

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Japan preparing 0bn stimulus package to bolster fragile economy