Prime Minister Suga’s administration has said its ¥73.6 trillion tranche (avalanche?) of new stimulus spending will have more of an impact than either of its larger packages earlier in the year, boosting the economy by 3.6%.
Economists beg to differ: Among experts Bloomberg contacted who gave an estimate, none saw the impact reaching much beyond 1% in the next fiscal year. “3.6% is just too big,” said one. “It’s only to be expected that after two large extra budgets the impact of further stimulus will be smaller over time.”
On the taxes front, the ruling coalition approved a reform package for fiscal 2021 Thursday with extensions of tax breaks for home and car purchases to underpin the pandemic-hit economy. The parties also aim to encourage the private sector to work toward carbon reduction and digitalization through tweaks to corporate taxation.
The nation’s initial budget for fiscal 2021 is on track to be a whopper, setting a record for the ninth straight year as the government increases reserve funds to deal with the pandemic and due to rising outlays for defense and social security. Sources tell Kyodo the total may even top ¥105 trillion.
But here’s some scary math: Japan’s public debt exceeded ¥1.1 quadrillion as of the end of fiscal 2019, more than double its GDP. And this fiscal year, tax revenue is expected to total ¥55 trillion, far short of the government’s initial projection of ¥63.5 trillion. But they must know what they’re doing, right?