‘13TRIL YEN STIMULUS READY’

Amount may rise to 25 trillion yen when other spending included, say sources

JAPAN is preparing an economic stimulus package worth US$120 billion to support fragile growth, said two government officials yesterday, and complicating government efforts to fix public finances.

The spending would be earmarked in a supplementary budget for this fiscal year to next March and an annual budget for the coming fiscal year from April.

Both budgets will be compiled later this month, the sources said.

The package would come to around 13 trillion yen but that would rise to 25 trillion yen when private-sector and other spending are included.

The Nikkei business daily reported on the weekend that the government was considering putting together a large-scale stimulus package with fiscal spending exceeding US$92 billion.

Japan’s economic growth slumped to its weakest in a year in the third quarter as soft global demand and the Sino-United States trade war hit exports, stoking fears of a recession.

Some analysts also worry that a sales tax hike to 10 per cent in October could cool private consumption which has helped cushion weak exports.

Such spending could strain Japan’s coffers — the industrial world’s heaviest public debt burden, which tops more than twice the size of its US$5 trillion economy. Despite the headline size of the stimulus, actual spending would be smaller in the current fiscal year, and economists are not expecting much of a boost.

“We expect this fiscal year’s extra budget to total between three and four trillion yen. We should not expect it to substantially push up the gross domestic product growth rate,” said Takuya Hoshino of Dai-ichi Life Research Institute.

The 13 trillion yen includes more than three trillion yen from fiscal investment and loan programmes, as the government seeks to take advantage of low borrowing costs under the Bank of Japan’s negative interest rate policy.

Direct government spending is expected to reach between seven and eight trillion yen, they said.

The government will mobilise construction bonds, unused money from the previous fiscal year’s budget and fiscal investment and loan programmes to secure necessary funding, the Nikkei reported yesterday.

The spending package won’t involve deficit-covering bond issuance, it added.

A final decision on the package could be made as early tomorrow.