Japan okays $182-bn fiscal stimulus to pull economy out of deflation
6 Dec 2013 12:30 AM GMT
After years of stubborn deflation, Japanese Prime Minister Shinzo Abe’s Cabinet approved a $182 billion package on Thursday to pull the economy out of it but doubts remained on the impact, said a news agency. The package has a headline value of 18.6 trillion yen, which is an exaggerated figure as its bulk includes loans from government-backed lenders and spending by local governments, which was already scheduled.
The core of the package is 5.5 trillion yen in spending measures which Abe ordered in October to bolster the economy ahead of a national sales tax hike in April, the news agency added. The government does not have to sell new debt to fund this spending. The package has raised concerns that Japan’s government has not broken away from the stop-gap measures and piecemeal policy-making that some say has hampered long-term growth.
‘Market participants want the government to focus even more energy on economic policy,’ said Mitsubishi UFJ Morgan Stanley Securities Senior Economist Hiroshi Miyazaki. ‘Some of these items, like reconstruction from the earthquake, were already scheduled and don’t really constitute an economic strategy.’
The latest steps will add 1 percentage point to gross domestic product (GDP) and create around 250,000 jobs, according to the Japan Cabinet Office. There is a consensus that the sales tax hike will subtract about 2 trillion yen from GDP and so 5.5 trillion yen in spending should more than compensate, observed Cabinet Office Senior Vice-Minister Yasutoshi Nishimura.
Miyazaki was less optimistic, saying that the measures may contribute only around 2 trillion yen, or 0.4 percentage point, to GDP as a lot of the direct government payouts to the elderly and families will go straight to savings.
The core of the package is 5.5 trillion yen in spending measures which Abe ordered in October to bolster the economy ahead of a national sales tax hike in April, the news agency added. The government does not have to sell new debt to fund this spending. The package has raised concerns that Japan’s government has not broken away from the stop-gap measures and piecemeal policy-making that some say has hampered long-term growth.
‘Market participants want the government to focus even more energy on economic policy,’ said Mitsubishi UFJ Morgan Stanley Securities Senior Economist Hiroshi Miyazaki. ‘Some of these items, like reconstruction from the earthquake, were already scheduled and don’t really constitute an economic strategy.’
The latest steps will add 1 percentage point to gross domestic product (GDP) and create around 250,000 jobs, according to the Japan Cabinet Office. There is a consensus that the sales tax hike will subtract about 2 trillion yen from GDP and so 5.5 trillion yen in spending should more than compensate, observed Cabinet Office Senior Vice-Minister Yasutoshi Nishimura.
Miyazaki was less optimistic, saying that the measures may contribute only around 2 trillion yen, or 0.4 percentage point, to GDP as a lot of the direct government payouts to the elderly and families will go straight to savings.
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