Sun, May 29, 2016 - Page 13 News List

Abe plans up to US$90.7bn stimulus: newspaper

BAD TIMING:Japanese Prime Minister Shinzo Abe is likely to delay a planned sales tax hike for a second time, as economic activity remains sluggish in the nation

Bloomberg

Japanese Prime Minister Shinzo Abe plans to propose a fiscal stimulus package of as much as ¥10 trillion (US$90.7 billion) after warning G7 leaders that the global economy faces significant risk of another crisis, according to the Nikkei Shimbun.

Abe will seek a second supplementary budget worth ¥5 trillion to ¥10 trillion after July’s upper-house election, the Nikkei reported yesterday without attribution.

Proposals will include accelerating the construction of a magnetic-levitation train line from Nagoya to Osaka, issuing vouchers to boost consumer spending, increasing pay for childcare workers and setting up a scholarship fund, the Nikkei said.

“When you want to get the economy going, as long as demand in Asia is weak, you need additional public spending,” Martin Schulz, a senior economist at Fujitsu Research Institute in Tokyo, said by telephone. “Since private spending is still not picking up, the government is simply taking up the slack.”

Abe is getting closer to delaying an increase in Japan’s sales tax, saying on Friday he will make a decision before an upper-house election this summer on whether to go ahead with a planned hike in the levy in April next year to 10 percent from 8 percent.

A formal announcement of a two-year delay is expected on Wednesday at the close of the parliamentary session, the Nikkei reported.

A Japanese government official declined to comment.

This would be the second postponement by Abe, as the tax was initially scheduled to be raised in October last year. An increase in the levy in 2014 pushed Japan into a recession.

Abe had previously said the tax hike would be delayed only if there was a shock on the scale of a major earthquake or a corporate collapse like that of Lehman Brothers Holdings Inc.

Since the previous tax hike, the economy has swung between contraction and growth, with consumer spending remaining weak.

Bank of Japan Governor Haruhiko Kuroda has struggled to spur inflation despite record asset purchases and negative interest rates.

Consumer prices excluding fresh food last month fell 0.3 percent from a year earlier, after dropping by the same amount in March, data released on Friday showed.

Meanwhile, the yen has surged about 9 percent versus the US dollar this year, threatening profits for exporters, including Toyota Motor Corp, and weighing on the nation’s stock market. The benchmark TOPIX has fallen 13 percent so far this year.

The stimulus package would be the second this fiscal year after Japan this month approved a ¥778 billion supplementary budget to aid recovery from earthquakes in the Kumamoto region.

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