/

Stimulus package to ease tax hike impact to be worth ¥18.6 trillion

Kyodo

Japan’s economic stimulus package to ease the potential negative impact of next April’s sales tax hike will be worth around ¥18.6 trillion, with fresh central government spending totaling ¥5.5 trillion, sources said Wednesday.

The latest stimulus package would be as large as the one worth around ¥20 trillion mapped out in January, in an attempt to perk up Japan’s lethargic economy beset by deflation.

To finance the package that Prime Minister Shinzo Abe’s Cabinet plans to endorse Thursday, an extra budget for the current fiscal year through next March is expected to be compiled as early as Dec. 12, the sources said.

Vowing to promote fiscal consolidation, the government has no plan to issue additional bonds, as Japan’s tax revenues in fiscal 2013 are expected to reach ¥45.4 trillion, about ¥2.3 trillion more than its January estimate.

In addition to the package, which will entail local government spending for public works projects and grants to support smaller firms’ financing, Abe’s administration has already decided to implement ¥1 trillion in tax cuts to invigorate business investment and prompt companies to raise wages.

To avoid a sharp economic downturn following the tax hike to 8 percent from the current 5 percent next April, the government will focus on taking measures that would have an immediate effect, such as public works projects and provision of subsidies to firms.

Under the stimulus package, ¥1.4 trillion would be allocated for steps to bolster industrial competitiveness, including new infrastructure investment ahead of the 2020 Tokyo Olympics, the sources said.

In a bid to prevent the tax hike from weighing on households, about ¥600 billion would be earmarked for cash benefits to those on low incomes, people with children and home buyers, as well as about ¥300 billion for employment support for women, the young and the elderly, they added.

The government would also allocate ¥3.1 trillion to promote support for evacuees affected by the Fukushima nuclear crisis and to cover the abolition of a special corporate tax surcharge, introduced to fund post-quake reconstruction work, one year earlier than scheduled at the end of next March.

Abe’s Cabinet, meanwhile, plans to cut expenditures for public works projects under an initial budget for fiscal 2014, government officials said.

In the basic outline of the budget, slated to be finalized in mid-December, the government is likely to pledge to improve the national general account’s primary balance by more than ¥4 trillion in the year and to make every effort to keep new debt issuance in the next fiscal year below that in fiscal 2013, they added.