Japan Approves Record C$619B Stimulus Package

Package aimed at boosting economy . . . 

On Friday, Japan’s Prime Minister Kishida Fumio unveiled his cabinet’s C$619.4-billion stimulus package to help jump-start the economy, which has been taking a beating during the pandemic. The country’s GPD contracted three per cent from July to September, much worse than expected, with the decline attributable in part due to low consumer spending, the ongoing ban on international tourists, decreased exports, and disrupted global supply chains. The stimulus is expected to boost GDP by 5.6 per cent. While the package won Cabinet approval, Kishida still needs to secure parliamentary approval when Parliament convenes next month.

A diverse package of initiatives . . .

The package-related initiatives are diverse. It includes a one-time payment of C$1,100 to individuals 18 and younger and aid for cash-strapped families, students, and struggling businesses. It also provides funds to boost wages for nurses and childcare workers and investment into the country’s pandemic and future crisis response. Revitalization of the ‘Go to Travel’ and ‘Go to Eat’ campaigns to stimulate domestic tourism is also on the table, as is a C$5.5-billion investment in key advanced technologies such as semiconductors and artificial intelligence. Further, the stimulus includes about C$8.5 billion earmarked for strengthening the coast guard and self defence forces.

Abenomics in a new bottle?

Some say the stimulus package’s record size suggests PM Kishida’s plans amount to a continuation of former PM Abe Shinzo’s collection of economic growth-promoting policies termed ‘Abenomics.’ One of the so-called ‘three arrow’ approaches for rejuvenating Japan’s economy under Abenomics focused on fiscal stimulus. Regardless, it appears that Kishida is trying to put his own stamp on the matter by framing the stimulus in terms of a “new form of capitalism” and “live with corona” measures, which he pitched as part of his election platform. But all this spending could add long-term pressure to Japan’s economy. Japan’s aging society has been shrinking for the last decade, its economic woes began well before the pandemic, and in 2020 its debt-to-GDP ratio reached a record 225 per cent – the highest in the world. The silver lining in all of this is that 78 per cent of eligible people in Japan are fully vaccinated, a dramatic increase since the Olympics this past summer, and its Delta surge is largely under control.