Japan approves $182 bln econ package, doubts remain

Reuters

TOKYO, Dec 5 (Reuters) - Japanese Prime Minister ShinzoAbe's cabinet approved a $182 billion economic package onThursday to pull the economy out of deflation, but doubts remainabout the economic impact.

The package has a headline value of 18.6 trillion yen ($182billion), which is an exaggerated figure as the bulk of thepackage includes loans from government-backed lenders andspending by local governments that was already scheduled.

The core of the package is 5.5 trillion yen in spendingmeasures Abe ordered in October to bolster the economy ahead ofa national sales-tax hike in April, and the government does nothave to sell new debt to fund this spending.

The package has raised concerns that Japan's government hasnot broken away from the stop-gap measures and piecemealpolicymaking that some say has hampered long-term growth.

"Market participants want the government to focus even moreenergy on economic policy," said Hiroshi Miyazaki, senioreconomist at Mitsubishi UFJ Morgan Stanley Securities.

"Some of these items, like reconstruction from theearthquake, were already scheduled and don't really constitutean economic strategy."

The measures approved on Thursday will add 1 percentagepoint to gross domestic product and create around 250,000 jobs,according to the Cabinet Office.

Miyazaki was less optimistic, saying the measures may onlycontribute around 0.4 percentage point as a lot of the directgovernment payouts to the elderly and families will go straightto savings.

The steps approved on Thursday include measures to boostcompetitiveness; assist women, youth and the elderly; acceleratereconstruction from the March 2011 earthquake and tsunami; andbuild infrastructure for the 2020 Tokyo Olympics.

The overall size of the package is on a par with Abe's 20trillion yen burst of spending early this year as part of hiscampaign to end 15 years of falling prices and tepid growth.

The headline figure usually announced by the Japanesegovernment on economic measures often includes spending that hasalready been committed, and tends to far exceed the amount ofactual new government spending.

New debt issuance is not required as new spending will becovered by tax revenues that have exceeded initial budgetprojections due to the economic recovery, as well as usingunspent funds from other accounts.

View Comments (0)