Japanese Prime Minister Shinzo Abe announced plans for more than 28 trillion yen ($354 billion) in economic stimulus in an effort to prop up the economy, Kyodo News reported.
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The plan will include 13 trillion yen in "fiscal measures," according to Jiji News, without specifying what that meant. There was no report of how much of the package would be new spending. Abe, speaking in the southern city of Fukuoka on Wednesday, said the package would be compiled next week, Kyodo said.
In the days after Abe's ruling coalition won a big victory in the upper-house election on July 10, he ordered that a stimulus package be compiled as he seeks to again revive the economy. Abe met former Federal Reserve chairman Ben Bernanke earlier this month and told him he wants to speed the nation's exit from deflation, underscoring his commitment to stimulus.
Japan's Topix stock index has risen more than 9 per cent since the election victory and the yen has weakened almost 5 per cent amid anticipation over the plan. Some economists have criticised the idea of a new spending package, saying the heavily indebted nation needs structural economic reforms and deregulation more than updated infrastructure.
There has been a lot of speculation about how large the stimulus would be, and how much new spending it would contain. The Nikkei newspaper reported on Tuesday that the plan would include 6 trillion yen of new spending, although only about 2 trillion yen of that would be in a supplementary budget to be passed this year. The government was discussing supplementary spending of about 3 trillion yen for the current fiscal year, two officials familiar with the talks said last week.
Japan's economic recovery is at risk as a slowdown in overseas demand and the yen's surge this year are making the nation's products less attractive overseas and hurting the earnings of exporters. Waning corporate profits may weigh on wage growth and household income, complicating the government's attempts to revive the economy.
Abe's stimulus plan comes ahead of the Bank of Japan's policy meeting that ends Friday. Economists expect further monetary stimulus from the BOJ. Any new spending must be presented to the parliament, where approval is a formality because the ruling coalition has a majority in both houses.
Bloomberg
