Analysts are split on whether the forthcoming stimulus package can prevent the economy from suffering a severe downturn after the 5 percent consumption tax is raised to 8 percent next April.
Some of them say the package, involving ¥5.5 trillion in fresh funds from the central government, will fail to support households that would be directly hurt by the tax increase, possibly triggering a sharp deterioration in consumer confidence.
Others argue that the package, including a de facto corporate tax cut, will help improve corporate profits and motivate companies to raise wages, as urged by Prime Minister Shinzo Abe to prop up consumer spending and the broader economy. Wages so far have been flat if not actually slumping further.