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Japan’s minority government was set Friday to sign off on a $140-billion stimulus drive aimed at putting more money in consumers’ pockets after the ruling party’s worst election result in 15 years.<\/p>\n
The October 27 contest saw voters — angry over corruption in the Liberal Democratic Party (LDP) and inflation — deprive new Prime Minister Shigeru Ishiba’s coalition of a majority in parliament’s lower house.<\/p>\n
Chief government spokesman Yoshimasa Hayashi said Friday that the package — reportedly worth 21.9 trillion yen ($141.8 billion) — would be approved by Ishiba’s cabinet later in the day.<\/p>\n
“The package will have business impacts worth around 39 trillion yen and additional general account spending, which provide backing for the package, will be 13.9 trillion yen,” Hayashi said.<\/p>\n
“We aim to emerge out of the cost-cut style economy and transfer into the high added value creation economy,” he told reporters.<\/p>\n
It includes energy and fuel subsidies and cash handouts up to 30,000 yen ($194) to low-income households in the world’s fourth-biggest economy, according to the media.<\/p>\n
To pay for the package, the second in as many years, the government will table a supplementary budget by the end of the year in the lower house.<\/p>\n
To win enough lawmakers’ support, Ishiba agreed to include the lifting of an income tax threshold pushed by the opposition Democratic Party for the People (DPP).<\/p>\n
The smaller party says this will ease labour shortages and boost consumer spending by encouraging part-time staff to work longer hours and earn more.<\/p>\n
But critics worry that this will reduce tax revenues by trillions of yen and increase Japan’s huge debt pile, which equates to more than 200 percent of gross domestic product.<\/p>\n
The strain on Japan’s public finances is set to grow with the number of pensioners rising and the number of people working and paying into state coffers projected to decline.<\/p>\n
– ‘Quiet emergency’ –<\/p>\n
With the Bank of Japan expected to keep hiking interest rates, this debt mountain will also cost more and more, SMBC Nikko Securities economist Yoshimasa Maruyama said.<\/p>\n
Tax cuts “must be accompanied by a permanent source of revenue to fill the gap”, Maruyama wrote in a research note.<\/p>\n
Ishiba, 67, has promised to revitalise depressed rural regions and to address the “quiet emergency” of Japan’s shrinking population with measures to support families such as flexible working hours.<\/p>\n
Going forward, businesses worry that the need to curry favour with opposition parties means Ishiba will avoid reforms needed to improve Japan’s competitiveness.<\/p>\n