|
|
 Japan Brief |
| 【Japan Brief】Japan Decides on Another Stimulus Package of Unparalleled Scale |
Japan Brief / FPCJ, No. 0920
April 13, 2009
Japan Decides on Another Stimulus Package of Unparalleled Scale
The Japanese government has laid out yet another stimulus package of an unprecedented scale in an attempt to face down ever-grimmer prospects of a domestic economic downturn. In what is called an “economic crisis measure” announced on April 10, a total of 15.4 trillion yen, equal to nearly 3% of the nation’s GDP, is appropriated in fiscal spending to generate immediate demand and boost longer-term growth potential.
Fiscal spending of this size is explained to translate into 56.8 trillion yen in economic effect and work to boost GDP growth by two percentage points, creating 400,000-500,000 new jobs in fiscal 2009. “But for these measures, Japan’s growth rate would plunge to minus 6-7%, while the unemployment rate would rise to somewhere near 8%, leaving 2 million people jobless,” Finance and Economic Minister Kaoru Yosano said. The Japanese economy was projected in March by the Organization for Economic Cooperation and Development to shrink by 6.6% in 2009.
Demand and job-creating programs to be facilitated by the package center on: provision of subsidies for the purchase of environment-friendly and energy-saving automobiles and household electric appliances; an inheritance tax break on house purchases; job training and broadening of unemployment benefit coverage; expansion of child-raising support; credit assistance to smaller firms suffering from the credit crunch; and stock market support through government buying of shares.
In an April 9 press conference at the National Press Club, Prime Minister Taro Aso delivered a speech to reveal Japan’s new growth strategy, which centers on realization of a low-carbon society; a society of longevity with security and health; and creation of soft power and tourism. He also stated that Japan would work to help Asian economies double by 2020.
The latest stimulus package, which is in addition to the three series of the government’s economic measures since last summer, is backed by a supplementary budget. The government plans to send to parliament the supplementary budget and related bills on April 27. The implementation of the stimulus measures is subject to passage of the bills by the Diet, which looks likely to take until mid-June.
One major concern being raised about the enormous stimulus package is its funding that requires bond issuance on the order of 10 trillion yen. This adds to an already high level of debt issues and a gargantuan public debt, equal to 1.5 times the nation’s GDP, the worst among industrialized countries. There is a possibility that a debt situation of this magnitude will push up long-term interest rates, hampering corporate investment and boomeranging on the government’s efforts to turn the economy around. Referring to the concern, Prime Minister Aso said that he would stick to the government’s years-long commitment to restoring fiscal balance by reducing budget deficits, while he conceded that “the flag of fiscal rebuilding is in tatters.” His remark confirmed his known intention to raise the consumption tax once economic recovery is achieved.
It is also criticized for being bloated by mounting political pressure for lavish spending in view of the impending general election, which must be called by September of this year. Critics say that many “handouts” without relevance to economic recovery or long-term growth potential have been loaded into the package.
Media Commentaries Wary of Fallout of Lavish Spending
Given the nation’s serious economic condition, editorial comments of major newspapers did note the necessity of fiscal spending of a major magnitude to prevent a further plunge. But they also expressed concern that the spending programs might be overdone.
The titles of the April 10 editorials of the Asahi Shimbun and the Mainichi Shimbun said it all: “Too much lavish spending” and “What consequences of lavish spending?” The Asahi said: “Although Japan’s economy is in a truly serious crisis, is it really necessary to promise such a huge additional dose of fiscal tonic just when the spending plan enacted last month is beginning to kick in?” The Mainichi commented: “The formation of a 15 trillion yen budget at this moment inevitably lets in policies that can only be taken as pork barrels geared to party interests and those that favor corporations and the wealthy. Populist measures also find it easy to make their way into the package.” It went on to say, “Even if it is true that we are in a ‘once-in-a-century’ crisis, fiscal management that leaves problems for the future is hardly justifiable.”
The Nikkei said on April 11, “Fiscal spending on a major scale is a necessary measure to prevent a further plunge of the economy.” It added, “The word ‘reform’ is almost totally absent in the language of this stimulus package,” and “One-shot fiscal stimulus will not lead to restructuring of low-productivity sectors and strengthening of the economic base.”
The Yomiuri Shimbun said in an April 10 editorial titled “Record stimulus package must be spent wisely,” “The latest package is a drastic fiscal move aimed at arresting the worst postwar recession, but it could prove to be a double-edged sword as it would generate a huge deficit. Spending must be carried out wisely to boost the economy and strengthen its growth potential.” In a similar tone, the Sankei Shimbun on April 11 said, “This country, which is in the worst fiscal crisis of all industrialized nations, is now set to carry out spending of a record size. If so, expected effects of the program must be maximum, but it is not clear whether that will be the case.”
(Copyright 2009 Foreign Press Center / Japan)
*Japan Brief is an original production of the Foreign Press Center, Japan, and does not represent the views of the Government of Japan or of any other body.
<Related Articles>
-At G-20 Meeting Japan Sides with the U.S. and China in Advocating Stimulus(2009-04-06)
-【Press Briefing Report】Prof. Hiroshi Yoshikawa, Univ. of Tokyo: Outlook for the Japanese Economy in 2009(2009-03-10)
-Steepest Shrinking of GDP in 35 Years in Last Quarter of 2008(2009-02-24)
-New Additional Bailout Measures(2009-02-09)
-Wage Negotiations Start amid Deteriorating Economy(2009-01-20)
-Government Drafts Largest-ever Budget for Fiscal 2009(2008-12-25)
|
|
|
|
