politics

Suga to compile big stimulus package around summer: Nikkei

7 Comments
By Leika Kihara

Japanese Prime Minister Yoshihide Suga is likely to compile another big economic stimulus package before calling a snap election in September, the Nikkei newspaper said on Thursday, although most major economies have scaled back crisis-mode policies to combat the coronavirus.

Opposition parties have called for a package sized around 30 trillion yen ($274 billion), a proposal Suga brushed aside in a debate with their leaders on Wednesday.

While the Nikkei did not report the expected size of the package, some analysts put a ballpark figure of 20-30 trillion yen as it would be enough to fill Japan's output gap - or the estimated size of slack in the economy.

"The output gap seems to be a benchmark when the government compiles a stimulus package, so the next one could be sized around 20-30 trillion yen or even bigger," said Toru Suehiro, a senior economist at Daiwa Securities.

"But the immediate boost to growth may be limited, as most spending will be for safety nets and steps like digitalization and green investment that take long for the effect to appear."

Tokyo has deployed massive stimulus packages totaling $3 trillion over the past year to combat the pandemic, further straining public finances by adding to the debt pile that is the biggest among major industrialized nations.

Suga has repeatedly brushed aside the chance of compiling another stimulus package any time soon, arguing that the government still had money left over from a pool of reserves set aside to meet immediate funding needs to combat the pandemic.

With some lawmakers from within his own Liberal Democratic Party (LDP) calling for bigger spending, however, many analysts expect Suga to compile an extra budget to fund another stimulus package later this year.

The size and timing of the package will depend much on when Suga call a snap election, a decision complicated by low approval ratings for his handling of the pandemic and the Tokyo Olympic Games starting from July 23.

A lower house election must be held around the time the incumbent lawmakers' term end on Oct 21. Suga must also win a ruling party leadership election when his term ends on Sept 30.

© Thomson Reuters 2021.

©2021 GPlusMedia Inc.

7 Comments
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ahh elections…

2 ( +2 / -0 )

Slow death of late stage capitalism and the role of fiat currencies in the world economy. Governments and central banks in most developed nations now have no other solution to the worlds economic problems than borrow, print and spend. None of this bodes well for the next decade.

0 ( +0 / -0 )

Opposition parties have called for a package sized around 30 trillion yen ($274 billion), a proposal Suga brushed aside in a debate with their leaders on Wednesday.

While the Nikkei did not report the expected size of the package, some analysts put a ballpark figure of 20-30 trillion yen as it would be enough to fill Japan's output gap - or the estimated size of slack in the economy.

Not having seen the particular's of the opposition's proposal, it probably included needed relief to the public, languishing in a K-shaped "recovery" and that was a no go for Suga.

Got to have enough lying around for subsidies for Japan Inc. donors, pork for the rural base pre-election, and the Olympic fallout before using an election mandate to raise regressive taxes on the public who will be paying the bill for the Olympic boondoggle and pandemic mismanagement!

0 ( +0 / -0 )

Oh, so this is where all the money was during ‘all the stalling’?

“…the government still had money left over from a pool of reserves set aside to meet immediate funding needs to combat the pandemic…

for a last ditch “suck up” before an election!

0 ( +0 / -0 )

Borrow, print and spend. Our financial elites are leading us on the road to ruin.

1 ( +1 / -0 )

Hopefully this will be distributed much more transparently than the last ones, letting huge companies with ties to the government get a big chunk of the money is not something that inspires confidence.

2 ( +2 / -0 )

"But the immediate boost to growth may be limited, as most spending will be for safety nets and steps like digitalization and green investment that take long for the effect to appear."

Well the debt shows up pretty fast as one effect, but indeed still waiting to see positive effects of persistent deficit spending over the last few decades… any day now for sure

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