A bill to implement the second supplementary budget for fiscal 2008 has been enacted with a second vote in the Lower House — where the ruling bloc has a two-thirds majority — after the opposition-controlled Upper House voted it down. Thus the ¥2 trillion cash handouts for all households and other economic stimulus measures are set to be carried out.

The problem is whether the cash handouts will have enough of an effect on the economy. Each person is to receive ¥12,000. If he or she is no more than 18 years old or no less than 65 years old, ¥8,000 will be added. By the end of fiscal 2008 or March 31, residents in only about 20 percent of the nation’s municipalities will receive the cash. An immediate stimulus effect from the cash handouts is unlikely.

People thought the ¥2 trillion could be put to better use. Various polls showed that some 70 percent of the polled were against the cash handouts. Not only the opposition parties but also some Liberal Democratic Party lawmakers proposed that the money be used for measures to help ensure employment. Even former Prime Minister Junichiro Koizumi said the money could be better used, and he was absent from the second vote in a Lower House plenary session.

It must be watched carefully whether the ¥2 trillion handout will have a meaningful effect on the economy. If it is found to have no such effect, the responsibility of Prime Minister Taro Aso and the ruling parties will be great because they pushed the cash handouts despite the opposition of both the opposition parties and the public, which was based on a reasonable argument.

It is believed that the ¥12 trillion in fiscal spending so far will not be enough to rekindle the economy. The Cabinet Office estimates that in the October-December quarter of 2008, in which gross domestic product in real terms contracted by an annualized 12.7 percent, there was a demand deficiency of about ¥20 trillion. As the gap is likely to grow, Mr. Aso is expected to order the ruling parties to come up with a new stimulus package. But one must wonder whether a Cabinet whose approval rating is hovering around 10 percent can convince the public to trust its judgment.

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