Japan’s New Stimulus Package to exceed $488 Billion

Nikkei Newspaper reported Japan’s new stimulus package to include $488 billion to boost economic recovery and overcome the covid-19 pandemic. The enormous spending plan will help give new Prime Minister Fumio Kishida a strong standing as he tackles to keep the nation afloat.

The stimulus package will help redistribute wealth among local citizens and families, with some being allocated to small business and firms suffering from the pandemic. The 55.7 trillion yen spending plan may include debt issued by the government. The overall value of the stimulus plan is likely to reach 78.8 trillion yen, exceeding last year’s spending packages.

However, many analysts are critical of the stimulus package and doubt the effects will last to keep the economy afloat. Chief strategist Shingo Ide at NLI Research Institute said, “What’s important is the content of the packages such as how much of it is related to a growth strategy. If that portion is small, stock markets won’t look at it very favorably.”

Policymakers are focusing on bringing the economy out of the pandemic era with extra stimulus and fiscal support. The country’s economy contracted for the third-quarter as global supply chain disruptions continued to affect manufacturing. The stimulus package will firstly be distributed to low-income households and families with children.

Hiroaki Muto, an economist at Sumitomo Life Insurance stated, “Even if the government issues new debt, it will likely be around 20 trillion yen. That’s an amount that can be smoothly absorbed by markets. The Bank of Japan is controlling the yield curve so interest rates won’t rise, which means it is essentially committing to buying an unlimited amount of government debt.”