TOKYO (AP) — Japan’s Cabinet on Friday approved a 21.3 trillion yen ($135.4 billion) economic stimulus plan aimed at stimulating the economy and cushioning the impact of high prices through increased government spending.
After taking office last month, Prime Minister Sanae Takaichi pledged to boost government spending despite concerns that progress in reducing Japan’s national debt, which is about three times the size of the economy, would be delayed.
The spending package is far higher than in years before the coronavirus pandemic and is also aimed at cushioning the impact of higher U.S. tariffs. japanese export to America President Donald Trump.
Exports to the United States in October fell for the seventh consecutive month, the government said on Friday, but exports to other countries rose 3.7%, due in part to an increase in exports to Asian countries.
In recent days, investors have sold Japanese government bonds, pushing yields higher while the yen has fallen to near its lowest level this year.
Stocks have also been hit by renewed friction with China after Gaoichi made comments that angered the Chinese government, prompting retaliatory measures such as warnings to Chinese tourists and students not to travel to Japan.
The extravagant spending package approved Friday includes subsidies for energy bills, gas tax cuts and other measures to help consumers struggling with rising costs of living. The government reported on Friday that core inflation, which excludes volatile food costs, stood at 3% in October, above the central bank’s target of around 2%.
Specific subsidies include a one-time cash transfer of 20,000 yen (approximately $130) per child, which would require approximately 400 billion yen ($2.6 billion) in government funding and the issuing of coupons such as rice coupons worth 3,000 yen (approximately $20) per child to be distributed by local governments.
The Takaichi administration will need to compile a supplementary budget by the end of this year to cover the funds and receive parliamentary approval. This is a major challenge for her ruling coalition, which lacks a majority in both houses of Congress.
Takaichi succeeded former Prime Minister Shigeru Ishiba, who was effectively ousted by rivals within the ruling party after losing a key election due to voter dissatisfaction with the minority government’s slow response to soaring prices and lagging wages.
As Japan first female prime minister, Mr. Takaichi has enjoyed high public support so far, largely due to expectations that he could shake up Japan’s elder statesmanship. But she is in a minority government and will need cooperation with opposition parties to pass a supplementary budget and spending package.
Opposition politicians and experts question whether the policy will be effective in achieving its goals. One is to lower consumer prices slightly by reducing energy costs. The impact on inflation is expected to be temporary, as increased demand from other stimulus measures tends to push prices higher.
The policy also aims to increase Japan’s gross domestic product by 24 trillion yen ($155 billion), or 1.4% annually, according to the Cabinet Office.
japanese economyis the world’s fourth largest economy, shrinking at an annual rate of 1.8% from July to September.
