Japanese Prime Minister Shinzo Abe’s cabinet approved a 28 trillion yen ($274 billion) stimulus package on Tuesday, the latest effort by Abe to jolt the nation’s sluggish economy back to life.
Abe has loosened fiscal policy amid a growing consensus among economists and policy makers that monetary policy alone won’t be able to revive stagnant economies. Abe also chose in June to postpone a planned sales-tax increase for 2 1/2 years.
The Bank of Japan last week only tweaked its monetary stimulus, confirming for many economists that it had reached the limits of its power to fuel growth and inflation.
By total size, the stimulus package ranks among Japan’s biggest since the global financial crisis, but three quarters of the stated value comprises targeted low-interest loans from the government and state-owned companies.
Actual new, direct spending will total only about ¥7.5 trillion, most of it over the next two years. The government will draw up a supplementary budget later this month to provide for extra stimulus spending of some ¥4 trillion in the year ending in March.
The program will include money for infrastructure projects, including a magnetic-levitation train line connecting Tokyo and Osaka. It also will pay for cash handouts of ¥15,000 each to 22 million low-income people, as well as reconstruction projects in a southern region hit by earthquakes in April.
Source: The Wall Street Journal