Japanese Prime Minister Fumio Kishida on Friday announced a record €432 billion stimulus for the world’s third-largest economy, as he looks to shore up the country’s patchy pandemic recovery.
The 56 trillion yen injection, the third since the COVID crisis struck last year, “is enough to deliver a sense of safety and hope to the Japanese people,” Kishida said.
The vast spending plans were expected to be approved by the cabinet later in the day and reportedly include cash and coupon handouts to families with children under 18 who meet an income cap, as well as pay rises for nurses and careworkers.
It comes after Japan’s economy shrank far more than expected in the second quarter as leaders struggled to overcome virus surges by imposing containment measures in Tokyo and other cities.
Former prime ministers Yoshihide Suga and Shinzo Abe poured 40 trillion yen and 38 trillion yen respectively into the economy in 2020, although some analysts have raised doubts over how effective that stimulus has been.
Former prime ministers Yoshihide Suga and Shinzo Abe poured 40 trillion yen and 38 trillion yen respectively into the economy in 2020, although some analysts have raised doubts over how effective that stimulus has been
“We have been able to build economic measures that will lead to a new society after the pandemic,” Kishida said at policy talks between the cabinet and ruling coalition. He said the 56 trillion in spending − roughly 10 per cent of Japan’s total GDP − was expected to rise as high as 79 trillion yen including other elements such as loans from private funds.
Kishida triumphed in a general election last month, having pledged to deliver a huge spending programme after Suga stepped down, partly over his government’s virus response.
Businesses, especially restaurants and bars, have endured months of on-off restrictions on opening hours and alcohol sales since the pandemic began. Japan’s borders also remain shut to tourists.
Government data showed this week that Japan’s economy shrank 0.8 per cent in the three months to September − far worse than market expectations − as a record surge in virus cases hit spending and supply-chain issues hampered business.
However, daily cases have nosedived in recent months, and more than three-quarters of the population are now fully vaccinated, with most restrictions now lifted nationwide.
Analysts said the stimulus would support Japan’s growth to some extent, but some questioned the effectiveness of handouts, with UBS warning it was unlikely to be a “game-changer” for the country’s economic outlook.
Japan already has an enormous public debt load, amounting to over 250 per cent of GDP according to the International Monetary Fund.