Daily Management Review

$45 Billion Spending Boost This Year Planned to be Given by Japan’s Fiscal Plan


08/02/2016




$45 Billion Spending Boost This Year Planned to be Given by Japan’s Fiscal Plan
As Prime Minister Shinzo Abe seeks to bolster the economy without abandoning targets for improving fiscal health, Japan’s government announced 4.6 trillion yen ($45 billion) in extra spending for the current fiscal year.
 
The government said that more investment was needed to expand the world’s third-largest economy even as the spending was approved by the cabinet on Tuesday as a part of what Abe flagged in a speech last week as a 28 trillion yen stimulus package. The Prime Minister said that acceleration of the construction of a high-speed maglev train line and providing better port facilities for cruise ships would be the uses of the fund.
 
Of the 13.5 trillion yen of fiscal measures that were announced include 6 trillion yen in low-cost loans and 7.5 trillion yen in new spending starting this year.
 
“It follows the pattern that they’ve established over the last couple years, that they basically announce a very big headline number, but the actual spending is much smaller. We currently have a forecast of 0.8 percent growth for next year, but with this number, the risks are probably tilted to the downside, because we were hoping for a bigger fiscal boost,” said Marcel Thieliant of Capital Economics in Singapore.
 
Along with loans that will probably be spread over several years, the package will be made up of fiscal measures under next year’s budget beyond the current year’s spending. While Abe’s promised structural reforms -- tackling areas like employment regulation -- have fallen short of expectations, the package is the latest in a long series that have had limited impact on the economy.
 
As exporters grapple with a slowdown in emerging economies, Britain’s vote to leave the European Union and the yen’s rise, the cabinet’s approval of the package could bring in good news. However, after the Bank of Japan made only minor policy adjustments at a meeting last week, concern is growing that it is running out of options for further monetary easing.
 
A Bloomberg Intelligence estimate put the boost at 0.1 percentage point for 2016 and 0.25 percentage point for 2017 while the government estimated the policy package would bolster gross domestic product by 1.3 percent in the near term. Economic growth of 0.3 percent this year and 0.1 percent in 2017 has been forecast by the IMF.
 
By 2020, expansion of the economy by 20 percent is the aim of Abe. Providing more care facilities for children and the elderly, increase the birth rate and bolstering household incomes are the measures that he has pledged to do.
 
Abe promised last week to tap reserves in the unemployment insurance fund to lower premiums and increase payouts after announcing in June he would put off an increase in the sales tax.
 
"We have been able to put together a strong package that includes bold investment for the future," Abe said ahead of the announcement, adding that Japan would maintain its fiscal targets for 2020.
 
Cash handouts of 15,000 yen for people on low incomes are included in the package -- the second to be compiled in the current fiscal year, NHK reported. 100 billion yen brought forward from next year’s budget is included in the 4.6 trillion yen figure for the fiscal year ending March.
 
(Source:www.bloomberg.com) 






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