Japan announces $383 billion stimulus package to spur a lagging recovery

Japan’s new prime minister announced a 43.7 billion yen ($383 billion) stimulus package, which includes generous cash supports for households and help for struggling businesses. difficult, to promote the country’s recovery after the pandemic.

NS big spending spree announced on Friday by Fumio Kishida defying global trends to relax stimulus measures amid growing concerns about overheating. In contrast, Japan has struggled to raise consumption with its economy contract in the third quarter due to supply chain disruptions and coronavirus restrictions.

The economic package – which includes 100,000 yen in stimulus checks for households with children under 18, students and those with low incomes – was one of Kishida’s main campaign pledges in the general election appointed last month.

Economists have questioned the effectiveness of cash distributions to promote consumption and the duration of the package. Japan’s economy is expected to recover over the next few months due to a sharp drop in the number of Covid-19 cases and the lifting of restrictions on eating and traveling within the country.

Japan has spent 88 billion yen on fiscal stimulus, or nearly 17% of gross domestic product, since the start of the Covid outbreak in 2020. The latest national government spending amounts to about 8% GDP.

The entire package includes an additional 12 billion yen in local government spending and financial investment and lending programs, and other loans, bringing the total to 78.9 billion yen. The government estimates that these measures will lift Japan’s economy by about 5.6%.

“We believe this economic package is sufficient in both content and scale to bring a sense of security and hope to the masses,” Kishida said on Friday.

But critics have questioned whether checks will actually reach those hardest hit by the pandemic, and expect most of them to go into bank savings.

“We think the impact [on GDP] Naohiko Baba, chief economist at Goldman Sachs in Tokyo, said it would likely be much lower than government estimates. He noted that 30% of the Covid-related emergency funds have not actually been used and spent on public works, which have a larger impact on GDP, is limited in size in the latest package.

Against those doubts, Economy Minister Daishiro Yamagiwa said: “The Kishida government has a great desire to invest in young people and children. As we implement these measures, we will ask the public to critically evaluate whether they are appropriate.”

In addition to the stimulus checks, the package also includes 2.5 million yen in subsidies for smaller companies hit by Covid and tax breaks to encourage wage increases. It also includes money for a 10 billion yen university endowment, subsidies to build chip factories and supply chains in Japan, and discounts for domestic travel.

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