Japan’s stimulus to be worth 21.3 trillion yen, largest since pandemic

[TOKYO] Japan’s government is in the final stages of assembling a stimulus package worth 21.3 trillion yen (S$176.8 billion), to help households cope with persistent inflation, in what would be the largest stimulus since the Covid pandemic.

The package reflects Prime Minister Sanae Takaichi’s expansionary fiscal and monetary policy stance, but comes as markets are increasingly worried about the scale of borrowing needed to fund her stimulus plans.

The package will include general account outlays of 17.7 trillion yen, far exceeding the previous year’s 13.9 trillion yen. It will also include 2.7 trillion yen in tax cuts.

It will be funded by an expected rise in overall tax revenue, as well as an additional issuance of government bonds, though the size of the issue is still to be finalised.

The additional government bond issuance is expected to be larger than the 6.7 trillion yen issued for last year’s stimulus, said sources who declined to be identified as the matter was still private.

Including private-sector funds that will get a boost from the planned government spending, the total package size will reach 42.8 trillion yen, the draft said.

The package will allocate 11.7 trillion in public funds for measures to curb rising prices and boost consumption. A further 7.2 trillion yen will go towards crisis management and sectors deemed crucial to economic security.

Local media reported that the government would give 20,000 yen per child to each family on top of existing child allowances, offer income tax breaks and reduce the petrol tax rate as part of the package.

Public broadcaster NHK first reported the size of the stimulus package.

SEE ALSO

Japan’s Takaichi says companies focus too much on shareholders

BOJ board member Koeda calls for policy normalisation

The Cabinet plans to approve the package on Friday (Nov 21) and have a supplementary Budget to fund it as early as Nov 28, aiming to secure parliamentary approval by the end of the year. The prime minister’s office was not immediately available to comment.

Takaichi has pledged to create a large spending package to mitigate households’ pain from rising living costs and boost investment since taking office last month.

Her administration has also promised to promote investment in industries like artificial intelligence, semiconductor chips and shipbuilding.

Market expectations that Takaichi will pursue huge spending backed by low interest rates have fuelled a sell-off in the yen and Japanese government bonds. REUTERS