Private consumption picked up 0.9 per cent in the second quarter. (Image source: Pixabay) Photograph:( Others )
Japan's PM Kishida announced his plan to spend around $490 billion in the stimulus package, and compile an extra budget by year-end to fund the measures.
Japan's government announced a record $490 billion spending package on Friday to cushion the economic blow from the COVID-19 pandemic, bucking a global trend towards withdrawing crisis-mode stimulus measures and adding strains to its already tattered finances.
The massive spending would underscore the resolve of Prime Minister Fumio Kishida to focus on reflating the economy and redistributing wealth to households.
In a meeting of government and ruling party executives on Friday, Kishida announced his plan to spend around $490 billion in the stimulus package, and compile an extra budget by year-end to fund the measures.
The total package, which includes funds that do not lead to immediate spending, will likely reach $690 billion, according to a final version of the draft of the stimulus package obtained by Reuters.
The government will announce details of the package after it is signed off at a cabinet meeting later on Friday.
Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management, said despite higher spending, the impact would be limited on markets as the Bank of Japan would keep borrowing costs low under its yield curve control policy.
Surging global crude oil prices, as well as a chip shortage and supply-chain constraints, undermined a trade-reliant economy seen to have shrunk in the third quarter as pandemic curbs and supply bottlenecks hurt consumption and output.
Measures to be included in the package are steps to ramp up domestic production of semiconductors as well as a $87.5 billion fund aimed at giving universities more resources to boost science and technological research, the draft showed.
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 firms hit hard by the pandemic, to total some 3 trillion yen, the Nikkei reported. It includes the resumption of tourism promotion to stimulate demand after the pandemic.