The Diet has enacted a ¥3.12 trillion extra budget for fiscal 2014 to fund an economic stimulus package aimed at boosting domestic demand aggravated by last year’s consumption tax hike and the yen’s plunge.
The supplemental budget was approved Tuesday evening in the Upper House with a majority vote led by Prime Minister Shinzo Abe’s Liberal Democratic Party and junior coalition partner Komeito.
It allocates ¥1.19 trillion for subsidies to alleviate the negative impact of higher prices and allow municipalities to implement measures to shore up their economies at their own discretion.
In a bid to invigorate sluggish private spending, the Abe administration will work to empower women in society, issue regional merchandise coupons and carry out steps to encourage people to relocate to rural areas.
With the housing market weakening, the administration will resume the “housing Eco-point” incentive program that grants points to people who construct or refurbish homes with green features.
The points are exchangeable for a range of environmentally friendly products or gift coupons.
Since taking office in December 2012, Abe has tried to boost the profitability of export-oriented manufacturers and lift stock prices by his economic policies entailing aggressive monetary easing and massive public spending.
But criticism has been growing that the “Abenomics” policy mix has only benefited big companies and people in large cities, with Abe under pressure to expand support for local economies and lower-income earners.
The economy contracted for a second straight quarter through September in the wake of the consumption tax hike to 8 percent last April.
The supplementary budget, however, doesn’t match the ¥5.5 trillion extra budget passed last year.
While Abe is eager to prop up regional economies in the run-up to nationwide local elections this spring, some analysts say the positive effects of the supplementary budget could be limited.
By using unspent money from the fiscal 2013 budget and tax revenue from the current fiscal year, the administration will finance the budget without selling new debt, in an attempt to restore the country’s precarious public finances.
Japan’s fiscal health is the worst among major industrialized economies, with public debt at more than 200 percent of gross domestic product.
The administration, meanwhile, plans to submit the initial fiscal 2015 budget to the Diet on Feb. 12.
The annual budget is unlikely to be enacted by the end of this fiscal year as the compilation process was deferred due to the Dec. 14 Lower House election.
If the budget isn’t passed by March 31, a stopgap budget will be formulated.
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