FUKUOKA – Prime Minister Shinzo Abe said Wednesday that a new economic stimulus package will exceed ¥28 trillion, with a partial focus on agriculture.
The massive package is partly seen as a bid to contain fallout from Britain’s decision to leave the European Union.
The size of the stimulus will be bigger than previous recent efforts, including a ¥20 trillion package in 2013 and ¥18 trillion in 2014.
The government is expected to boost spending on infrastructure and ways to step up farm exports, as well as efforts to lure more foreign tourists.
Actual government spending is likely to be less than the declared total, with part of the stimulus coming from the fiscal loan and investment program, which is not based on the general budget. The Cabinet is expected to approve the package next Tuesday.
The government will also compile an extra budget for the fiscal year to finance some of the measures, sources said. It plans to submit the draft budget to an extraordinary Diet session this September.
In a speech in Fukuoka, Abe said the package will be compiled next week, focusing on investment in growth and taking what he called a “significant step” toward a new agricultural policy.
Again seeking to revive the moribund economy, Abe ordered a stimulus package be compiled in the days after the ruling bloc’s resounding victory in the July 10 Upper House election. But the government will find itself in a difficult position with limited excess funds, likely necessitating the issuance of new bonds to pay for a large package of new spending.
“Tax revenues aren’t rising, and the funds for an extra budget are limited,” said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo. “This is all padding,” with the government pretending it has resources even though they don’t, he added.
“Looking at what has been reported, they’re just lining up a bunch of different things. Once we see the details, I think the reaction is going to be worse,” Ueno said.
The nation’s economic recovery is at risk as a slowdown in demand overseas and the yen’s surge this year hurts exporters. In particular, the earnings of exporters are suffering.
Waning corporate profits may weigh on wage growth and household income, complicating the government’s attempts to revive the economy.
Abe’s announcement of the stimulus plan comes ahead of a Bank of Japan policy meeting that ends Friday. Economists expect further monetary stimulus by the BOJ.