Business

Japan's ruling bloc calls for ¥10 trillion to boost typhoon recovery and slowing growth

Reuters

Ruling coalition lawmakers have called for an extra budget that would include ¥10 trillion ($92 billion) in spending to support slowing growth and recovery from two powerful typhoons, party officials said on Thursday, raising worries about straining public finances.

The agreement, made in a meeting between senior officials of the Liberal Democratic Party and Komeito on Wednesday, highlights the concern among lawmakers about the economic outlook due to a sales tax hike in October and slowing global demand.

“Prime Minister (Shinzo) Abe told us to compile a sizable package to take all possible steps on the economy,” economy minister Yasutoshi Nishimura told a news conference on Wednesday.

“We want to craft a strong economic package, taking into account the economic situation, global economy and damage caused by typhoons, which were larger than last year, so as to get the economy on a solid growth path.”

However, analysts have doubts about Abe’s ability to spend such a large amount given Japan’s government debt, which is twice the size of its $5 trillion economy and the industrial world’s heaviest public debt burden.

“Even if the government secured a budget for big public works, it would be difficult to implement it smoothly,” said Kiichi Murashima, economist at Citigroup Global Markets Japan.

“Chances are low for the government to compile a supplementary budget worth ¥10 trillion. We expect the size of this fiscal year’s extra budget to fall short of ¥5 trillion.”

The government will compile a supplementary budget for the current fiscal year ending in March 2020, as well as next fiscal year’s budget plan in December, allowing funds to be disbursed over a 15-month period, sources said.

Both budget drafts need parliamentary approval to take effect.

Supplementary budgets of more than ¥10 trillion have only been compiled four times in the past, including after the devastating earthquake and tsunami in 2011.

The ruling bloc’s requests focus on spending for disaster relief from a string of typhoons that struck Japan earlier this year and funding to help farmers cope with fallout from a U.S.-Japan trade deal that opens some markets to U.S. goods.

Earlier this month, Abe ordered his Cabinet to compile a package of stimulus measures to cope with external risks and large natural disasters and support the economy after the 2020 Tokyo Olympics.

“We need a huge supplementary budget sized at least around ¥10 trillion,” LDP heavyweight Toshihiro Nikai told reporters earlier this week.