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Abe orders drafting of new stimulus package to breathe life into Japan’s economy

by Reiji Yoshida

Staff Writer

Prime Minister Shinzo Abe ordered economic revitalization minister Nobuteru Ishihara on Tuesday to draft a range of economic measures to bust deflation and raise Japan’s growth potential, including with a supplementary budget for fiscal 2016.

The government will submit the budget draft for fiscal 2016 to an extraordinary Diet session this fall, Ishihara told a news conference later in the day.

Ishihara declined to comment on the size of the economic measures, saying that will be decided at the end of the month using a “bottom-up approach.”

On Tuesday, the Nikkei financial newspaper reported the projects are likely to be worth about ¥10 trillion, including the supplementary budget and government-backed loans to businesses.

Ishihara said the budgets will likely benefit workers at nurseries and day care services for the elderly, but he declined to give any further details.

“The aim of the economic measures is to make investments for the future,” Ishihara said.

However, the list of planned projects also includes public works projects that are often used as sweeteners for the construction industry and to reward local politicians who helped secure the LDP’s election victory.

In a written instruction to Ishihara, Abe ordered the minister to accelerate construction of maglev railway lines and to expand the nation’s shinkansen bullet train network.

There will also be spending on measures to help farmers and fishermen export their products, the paper said.

Abe urged Ishihara to take advantage of the negative interest policy recently introduced by the Bank of Japan, which would lower borrowing costs for the already debt-ridden government.

This means Ishihara was urged to issue more public bonds to finance the projects, further adding to government debt.

Japan’s public debt amounts to more than 200 percent of gross domestic product, the highest of all developed countries.

But Ishihara emphasized that the government needs to do what it can to stimulate the economy and end deflation, which would then lead to economic growth and lower the ratio of debt to GDP.

According to the paper, the supplementary budget will also include financial assistance for cash-strapped Japanese firms that may suffer fallout from Britain’s decision to leave the European Union, and budgets for disaster-hit areas in the Tohoku region and Kumamoto Prefecture.