Source: TODAY Online – Tokyo okays S$142b stimulus
The Japanese government yesterday approved ¥10.3 trillion (S$142 billion) of extra spending in the country’s biggest stimulus since the financial crisis and vowed to beef up ties with the Bank of Japan (BoJ) in the latest effort to defeat deflation and prop up the weakening economy.
The administration of Prime Minister Shinzo Abe said the stimulus package would raise real annual economic growth by 2 percentage points and create 600,000 new jobs. But it would also mean the already heavily indebted government will need to borrow another ¥5 trillion, adding to its debt burden, now well over 200 per cent of GDP.
He(Abe) said the overall extra budget, which includes the stimulus measures, was the second-largest spending package in Japan’s history after one that followed the financial crisis that began in 2008.
The hefty emergency package contains ¥5.5 trillion in public works projects. Taken together with spending by local governments and private sector firms, the size of the entire package could exceed ¥20 trillion, according to government officials.
The BoJ’s policy board will meet on Jan 21 and 22 and is likely to adopt the higher inflation target and take additional easing measures, most likely by increasing government debt and asset purchases, sources told Reuters.
The stimulus announcement came just hours after Japan reported its second-largest trade deficit of ¥222.4 billion in November, underscoring the challenges facing the export-dependent economy.
As part of an effort to weaken the yen and boost exports, the Abe government will set up a facility to help domestic companies purchase overseas counterparts and natural resources. Japan will also buy bonds from the European Stability Mechanism using the nation’s large foreign reserves, Finance Minister Taro Aso said.