Tokyo — Japan announces a record $ 490 billion spending package on Friday to mitigate the economic blow of the COVID-19 pandemic, withdraw crisis mode stimuli and put a strain on already tattered finances Overturned the global trend.
Spending has skyrocketed due to a series of payments, including criticisms of being unrelated to the pandemic, such as cash distribution to households of young people under the age of 18, which could lead to additional bond issuance this year.
Huge spending will underscore Fumio Kishida’s determination to focus on the redistribution of the economy and the redistribution of wealth to households (formerly considered fiscal conservatism).
“The reflationary monetary policy and home-going fiscal policy pioneered by (former Prime Minister) Shinzo Abe are now orthodox,” said James Brady, an analyst at Teneo.
“Kishida was known to be a little hawkish in the past, but he seems ready to continue the Abenomics paradigm for a few more years.”
The package finalized by the Cabinet on Friday was reserved for household spending from cash payments of 55.7 trillion yen ($ 490 billion), subsidies to companies infected with COVID-19, and emergency pandemic spending. A reserve was included.
Spending far exceeds the market’s estimate of 3-40 trillion yen ($ 263 billion- $ 351 billion) and will be covered by an additional budget of about ¥ 32 trillion ($ 281 billion) this year. The rest will be covered by next year’s budget.
The total package value, including funds that do not lead to immediate spending, is likely to reach 78.9 trillion yen ($ 693 billion).
“We will mobilize all the tools available to fund the package, including the issuance of bonds that cover the deficit,” Fumio Kishida said in a group interview. He didn’t say how much debt he could issue.
Package critics focused on its stunning scale.
“Expansion may be the goal with little discretion over whether spending is effective,” said Takumi Tsunoda, senior economist at the Shinkin Central Bank Institute. “It’s a lot of wasted spending.”
Japan lags behind other economies in breaking out of the pandemic slump, and policy makers should maintain large-scale fiscal and financial support even as other developed economies regain crisis-mode policies. Have been forced to.
Policy makers want new spending to help support the economy. The economy shrank more than expected in the third quarter due to the impact of consumption and exports due to a pandemic restraint and global supply turmoil.
Japan’s three huge spending packages to counter the pandemic leave unpaid long-term debt about twice that of the $ 5 trillion economy.
($ 1 = 113.8423 yen)
Reika Kihara, Tetsushi Kajimoto