Japan plans $350 billion stimulus to ease the pain of COVID-19 and oil costs – Community News

Japan plans $350 billion stimulus to ease the pain of COVID-19 and oil costs

  • PM Kishida unveils major stimulus package on November 19
  • Stimulus includes steps to face pandemic, oil costs
  • Expenditure to be financed by more debt as growth is a priority

TOKYO, Nov. 12 (Reuters) – Japan’s economic stimulus package will require fiscal spending worth 40 trillion yen ($350 billion), the Nikkei business reported on Friday, and a draft spending plan reviewed by Reuters includes steps to the pain of rising oil prices.

Prime Minister Fumio Kishida, strengthened by last month’s election victory, has vowed to put together a stimulus package “worth several tens of trillions of yen” on Nov. 19 to help the world’s third-largest economy recovering. of the coronavirus, to give a boost. .

Spending is likely to be financed by new debt, adding to the industrial world’s heaviest public debt, more than twice the size of Japan’s economy, as Kishida prioritizes pandemic recovery over fiscal reforms.

Analysts were surprised by the larger-than-expected spending plan.

“Spending far exceeds the output gap of 22 trillion yen. (Kishida) needs to come under pressure to ramp up spending ahead of next summer’s Senate election,” said Saisuke Sakai, senior economist at Mizuho Research and Technologies.

“This looks like nothing but pig barrel spending.”

Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management, said that despite increased spending, the impact on markets would be limited as the Bank of Japan would keep borrowing costs low as part of its yield curve control policy.

Rising global crude oil prices, as well as shortages of chips and supply chain restrictions, undermined a trade-dependent economy that contracted in the third quarter as pandemic curbs and supply bottlenecks hurt consumption and output.

“We will prepare flexible measures against rising energy costs in the upcoming stimulus package,” Economic Affairs Minister Daishiro Yamagiwa told reporters earlier on Friday.

“Steps will target sectors such as agriculture, forestry and fisheries, as well as logistics companies, which cannot live without fuel.”

Other measures to be included in the package include steps to ramp up domestic semiconductor production, as well as a 10 trillion yen ($87.5 billion) fund to give universities more resources to boost scientific and technological research. this is apparent from the design.

The spending plan will also get a boost from cash payouts to citizens aged 18 or younger, which would cost about 2 trillion yen, and to small businesses hard-hit by the pandemic, totaling some 3 trillion yen, the government said. Nikkei. It includes resumption of tourism promotion to boost demand after the pandemic.

($1 = 114,0500 yen)

Reporting by Takaya Yamaguchi; Additional reporting by Kantaro Komiya, Sakura Murakami and Tetsushi Kajimoto; Edited by Christopher Cushing and Lincoln Feast.

Our Standards: The Thomson Reuters Trust Principles.