The Abe administration's latest stimulus package relies heavily on public works spending as a measure to shore up the economy when a sharp downturn in consumer spending is expected after the consumption tax is raised in April. The package, which has the central government spending more than it is due to receive in revenue from the consumption tax hike, shows that the Japanese economy has yet to enter a self-sustained cycle built on private-sector demand and investment.
The government is said to have prioritized public works projects that will have an immediate effect on the economy. The package, worth ¥18.6 trillion, includes measures to promote reconstruction work in areas hit hard by the March 2011 quake-tsunami disaster and new infrastructure investment, such as road construction in and around Tokyo, ahead of the 2020 Summer Olympic Games.
It is the second major stimulus under Prime Minister Shinzo Abe, following the ¥20 trillion package adopted in January. Public works projects earmarked in the last package underpinned the slowing 1.1 percent annualized growth in gross domestic product for the July-September period, when consumer spending and capital investments by the private sector rose a mere 0.2 percent and 0.01 percent, respectively, from the previous quarter.