politics

Ruling bloc calls for ¥10 tril fiscal package to support growth

9 Comments
By Yoshifumi Takemoto and Leika Kihara

Japan's ruling coalition lawmakers have called for an additional budget that would include 10 trillion yen in spending to support slowing growth, party officials said on Thursday, raising worries about straining public finances.

The agreement, made in a meeting between senior officials of Japan's ruling coalition on Wednesday, highlights the concern among lawmakers about the economic outlook thanks to a sales tax hike in October and slowing global demand.

"Prime Minister (Shinzo) Abe told us to compile a sizable package to take all possible steps on the economy," Economy Minister Yasutoshi Nishimura told a news conference on Wednesday.

"We want to craft a strong economic package, taking into account the economic situation, global economy and damage caused by typhoons, which were larger than last year, so as to get the economy on a solid growth path."

However, analysts have doubts about Abe's ability to spend such a large amount given Japan's government debt, which is twice the size of its $5 trillion economy and the industrial world's heaviest public debt burden.

Additionally, major infrastructure spending programs could still face serious execution risks given the country's tightest labour market in decades amid a rapidly aging population.

"Even if the government secured a budget for big public works, it would be difficult to implement it smoothly," said Kiichi Murashima, economist at Citigroup Global Markets Japan.

"Chances are low for the government to compile a supplementary budget worth 10 trillion yen. We expect the size of this fiscal year's extra budget to fall short of 5 trillion yen."

The government will compile a supplementary budget for the current fiscal year ending March 2020, as well as next fiscal year's budget plan in December, allowing funds to be disbursed over a 15-month period, sources said.

Both budget drafts need parliamentary approval to take effect.

Supplementary budgets of more than 10 trillion yen have only been compiled four times in the past, including after Japan's devastating earthquake and tsunami in 2011.

The ruling bloc's requests focus on spending for disaster relief from a string of typhoons that struck Japan earlier this year and funding to help farmers cope with fallout from a U.S.-Japan trade deal that opens some markets to U.S. goods.

Earlier this month, Abe ordered his cabinet to compile a package of stimulus measures to cope with external risks and large natural disasters, and support the economy after the 2020 Tokyo Olympics.

"We need a huge supplementary budget sized at least around 10 trillion yen," Abe's Liberal Democratic Party's (LDP) heavyweight Toshihiro Nikai told reporters earlier this week.

© (c) Copyright Thomson Reuters 2019.

©2019 GPlusMedia Inc.

9 Comments
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So, where have the funds gone from the sales tax increases? These were supposed to be used instead of increasing the public debt. I’m curious if any of these ruling party law makers have actually studied economics. It would seem the answer is obviously, no.

4 ( +5 / -1 )

Why is it that not a single lawmaker seems to mention the wage problem. They keep saying consumer spending is shrinking. The sales tax hike is hurting the economy. Solution: increase government spending on businesses and reduce corporate taxes. Not a single solution is geared towards the people.

How about larger income credits for children? How about a stimulus package that directly benefits the people over businesses? You keep giving businesses money in hopes they do more for people and they keep proving you wrong. Try a new route.

6 ( +6 / -0 )

Who are they calling on - the guys at the mint who run the printing presses?

5 ( +5 / -0 )

So, where have the funds gone from the sales tax increases?

Well they spent half of the expected extra revenues already on giving families like mine (which don't need assistance), assistance, but probably some needy people are getting something. I keep telling myself that.

The other half of the extra revenues is supposed to be used to simply reduce the rate of growth in public debt - e.g. pay for a little more of the spending the government has already been doing, anyway. Go further into debt, just a little bit more slowly. 

They keep saying consumer spending is shrinking.

Given the shrinking population, it seems to me like a no-brainer that consumer spending is going to shrink. Unless the aging population that is left starts spending so much more per capita to be able to offset the shrinking number of overall consumers.

The sales tax hike is hurting the economy. 

It's excessive government spending and unsustainable government programs that have led to the sales tax hike, I think that is the root cause of this mess. The root causes must be addressed, not the consequences and symptoms.

How about larger income credits for children?

But they already made stuff free for families like mine with children of certain ages. And my family doesn't even need this free stuff. I'd rather they simply stopped such willy-nilly spending.

You keep giving businesses money in hopes they do more for people 

Personally I think Japan needs to make it's business environment the most attractive in the world. That plus lots of other reforms.

The government has already given me extra money after this tax rate hike, and I simply pocket it and go on as before. That's just me of course.

5 ( +5 / -0 )

Where does the money keep popping up from? Japan is nearly 280% of GDP in debt. To keep spending is fiscally suicidal!

2 ( +2 / -0 )

So, where have the funds gone from the sales tax increases? These were supposed to be used instead of increasing the public debt. I’m curious if any of these ruling party law makers have actually studied economics. It would seem the answer is obviously, no.

NO! The consumption tax increase was solely marked for child care and related issues!

1 ( +1 / -0 )

This wouldn't be a bad idea if it were to promote growth.

Propping up dairy farmers with fifteen cows against lowered tariffs is about as far from promoting growth as you can get.

4 ( +4 / -0 )

analysts have doubts about Abe's ability to spend such a large amount given Japan's government debt, which is twice the size of its $5 trillion economy and the industrial world's heaviest public debt burden

What this does not mention is, almost all of this debt is owed to Japanese. Therefore, its a stable debt, no need to panic.

-4 ( +0 / -4 )

As another poster stated, we should be looking at wasteful government spending. Of course, they’ll never do that or just cut the token publicly funded cherry blossom party. Next in line: individual income tax top rate increases to 80% (well, they’re rich and everyone hates rich people, right?), and while we’re at it, let’s increase the inheritance top rate to 80% too (the dead won’t need the money anyway).

2 ( +2 / -0 )

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