Japan unveils 383 billion. dollars stimulus package to boost a delayed recovery

Japan’s new prime minister has unveiled a stimulus package of 43.7 tonnes ($ 383 billion), including generous cash distributions to households and aid to struggling companies, to boost the country’s lagging recovery from the pandemic.

The massive consumer spree announced by Fumio Kishida on Friday defies a global trend to phase out stimulus measures amid growing concerns about overheating. In contrast, Japan has struggled to lift consumption with its economy declining in the third quarter due to supply chain disruptions and coronavirus restrictions.

The economic package – which includes ¥ 100,000 in stimulus checks for households with children under 18, students and those on low incomes – was one of Kishida’s main campaign promises during last month’s parliamentary elections.

Economists have questioned the effectiveness of cash distribution to increase consumption and the timing of the package. The Japanese economy is expected to recover over the next few months due to a sharp drop in Covid-19 cases and a lifting of restrictions on dining and domestic travel.

Japan has already spent ¥ 88tn on fiscal stimulus, or nearly 17 percent of gross domestic product, since the start of the Covid outbreak in 2020. Recent national government spending amounts to about 8 percent of GDP.

The whole package includes an additional ¥ 12tn in local government spending and fiscal investment and loan programs and other loans, bringing the total amount to 78.9tn. The government estimates that the measures will lift Japan’s economy by around 5.6 per cent.

“We believe that this economic package is sufficient both in terms of content and scale to deliver a sense of security and hope to the general public,” Kishida said Friday.

But critics have questioned whether checks will actually reach those hardest hit by the pandemic, expecting most of them to be transferred to bank savings.

“We are thinking about the impact [on GDP] is probably far less than the government’s estimates, ”said Naohiko Baba, chief economist at Goldman Sachs in Tokyo. He noted that 30 percent of Covid-related emergency funds have not actually been used and that spending on public works, which has a greater impact on GDP, is limited in size in the latest package.

In response to such skepticism, Economy Minister Daishiro Yamagiwa said: “The Kishida administration has a very strong desire to invest in younger people and children. When implementing these measures, we will ask the public to strictly assess whether they were appropriate or ej. ”

In addition to stimulus checks, the package also includes DKK 2.5 million. It also covers money for a ¥ 10tn university fund, grants to build chip factories and supply chains in Japan, and discounts on domestic travel.

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