TOKYO: Japan is preparing an economic stimulus package worth US$120 bil (RM500 bil) to support fragile growth, two government officials with direct knowledge of the matter said on Tuesday, and complicating government efforts to fix public finances.
The spending would be earmarked in a supplementary budget for this fiscal year to next March and an annual budget for the coming fiscal year from April. Both budgets will be compiled later this month, the sources told Reuters, declining to be identified because the package has not been finalised.
The package would come to around ¥13 tril (RM500 bil), but that would rise to ¥25 tril when private-sector and other spending are included.
The Nikkei business daily reported on the weekend that the government was considering putting together a large-scale stimulus package with fiscal spending exceeding US$92 bil.
Japan’s economic growth slumped to its weakest in a year in the third quarter as soft global demand and the Sino-US trade war hit exports, stoking fears of a recession. Some analysts also worry that a sales tax hike to 10% in October could cool private consumption which has helped cushion weak exports.
Such spending could strain Japan’s coffers – the industrial world’s heaviest public debt burden, which tops more than twice the size of its US$5 tril economy.
Despite the headline size of the stimulus, actual spending would be smaller in the current fiscal year, and economists are not expecting much of a boost.
“We expect this fiscal year’s extra budget to total around ¥3 tril to ¥4 tril. We should not expect it to substantially push up the GDP growth rate,” said Takuya Hoshino, senior economist at Dai-ichi Life Research Institute.
The ¥13 tril includes more than ¥3 tril from fiscal investment and loan programmes, as the heavily indebted government seeks to take advantage of low borrowing costs under the Bank of Japan’s negative interest rate policy.
Direct government spending is expected to reach around ¥7 tril to ¥8 tril, they said.
The government will mobilise construction bonds, unused money from the previous fiscal year’s budget and fiscal investment and loan programmes to secure necessary funding, the Nikkei reported on Tuesday.
The spending package won’t involve deficit-covering bond issuance, the Nikkei added.
A final decision on the package could be made as early as Thursday. – By Yoshifumi Takemoto and Tetsushi Kajimoto, Reuters
