Business / Economy

Japan plans ¥20 trillion stimulus package to shore up economy, brace for Brexit

Kyodo

The Japanese government is arranging to compile a stimulus package of at least ¥20 trillion ($188 billion) to help the domestic economy emerge from deflation and fend off the possible adverse effects of Brexit, sources said Wednesday.

The government initially envisaged compiling a stimulus package of somewhat more than ¥10 trillion. But the size is likely to double as the package will now include projects for fiscal 2017 and beyond and increase the zaito low-interest government loans by ¥6 trillion, the sources said.

There is also a possibility the size of the package and public expenditure may increase even further, depending on agreements between the government and the ruling coalition of the Liberal Democratic Party and Komeito, the sources said.

The government of Prime Minister Shinzo Abe will seek Cabinet approval for the stimulus measures in early August, with part of the package expected to be financed by a supplementary budget for fiscal 2016 to be compiled this fall.

In the stimulus package, the government plans to earmark around ¥8.3 trillion for building and improving infrastructure. That sum includes ¥3 trillion for extending to Osaka a magnetically levitated train line now planned to run from Tokyo to Nagoya.

To contain financial instability stemming from the Britain’s vote last month to leave the European Union, the government plans to lend its dollar funds to companies, the sources said. To cope with repercussions from Brexit, the government will provide ¥3 trillion from its foreign exchange reserves to the state-backed Japan Bank for International Cooperation, which will extend low cost funds to Japanese companies.

The government also expects ¥3.4 trillion to be used to support Japanese companies building infrastructure abroad, the sources said.

The stimulus measures also include improving disaster resilience of buildings and other facilities as well as introducing steps to facilitate agricultural exports.