The Abe administration has drawn up a ¥3.5 trillion stimulus package — which includes roughly ¥400 billion in new grants to local governments to spur consumption as well as other funds to ease the pain of the weak yen on businesses and consumers. When the extra budget to finance the measures is tabled, the Diet should scrutinize the package and see if it's really necessary.
Japan's economy indeed shrunk for two consecutive quarters following the consumption tax hike in April, which dampened consumer spending by imposing an additional ¥8 trillion burden on consumers. But at present, both the government and the Bank of Japan maintain that the economy remains on the path of a modest recovery. If this is really the case, it is contradictory for the government to introduce a costly stimulus package at a time when it and the central bank assert that the economy will not take a sharp downturn in the foreseeable future.
The timing of the package also raises the question of whether Prime Minister Shinzo Abe, who announced the plan for the package just as he dissolved the Lower House in November, intends the stimulus as a measure to woo voter support for the general election last month and for the unified series of local elections in April.