Japan expected to deliver at least ¥20 trillion in new stimulus

Prime Minister Yoshihide Suga is likely to unveil another economic stimulus package worth at least ¥20 trillion within the next few months, according to a Bloomberg survey.

All but one of 18 surveyed economists said the announcement would come before national elections that must be held by early fall. The median forecast was for a package of between ¥20 trillion and ¥30 trillion.

The new spending would come as Suga looks to shore up support amid widespread dissatisfaction with his handling of the virus and a vaccine rollout that’s lagged other developed nations.

Over the weekend, Tokyo voters chose not to give the ruling coalition a majority of the city’s assembly seats, a decision seen as a harbinger of what could come later in national elections.

Economists estimated the new stimulus package would be funded by an extra budget of between ¥10 trillion and ¥15 trillion, financed with ¥7.5 trillion in new government bonds.

The survey didn’t ask analysts to specify where the remaining stimulus money would come from, but Japan typically includes contributions from private businesses to inflate the headline size of its packages.

Japan’s economy is seen as having barely eked out growth last quarter amid stop-and-go restrictions to contain outbreaks. But with the country’s vaccine drive now gaining pace, most analysts see the government focusing its new spending on post-coronavirus growth measures, rather than more virus fighting.

Analysts said they see ¥1 trillion being earmarked for revitalizing Japan’s semiconductor industry, another ¥2 trillion for digitalization and ¥2 trillion on helping meet climate change goals.

The new spending would follow three extra budgets already drawn up during the pandemic that added about ¥70 trillion to Japan’s debt pile.