Japan’s ruling party is seeking a stimulus package that is substantially bigger than originally announced, involving ¥15 trillion (US$150.4 billion) in new fiscal spending to wrest the world’s second-largest economy from a debilitating recession.
The measures, equivalent to 3 percent of the country’s GDP, were approved by the ruling Liberal Democratic Party’s executive council, a party official said yesterday on condition of anonymity, citing department policy.
The official declined to provide details of the package and said the proposal would get the government’s go-ahead today.
If approved, the spending will result in Japan’s biggest-ever supplementary budget, Kyodo news agency reported.
The news sparked a stock market rally yesterday and sent the benchmark Nikkei 225 index soaring 3.7 percent to 8,916.06.
The spending figure represents a 50 percent jump from the US$99 billion package that Japanese Prime Minister Taro Aso ordered on Monday.
The prime minister wanted new government spending to exceed 2 percent of GDP given “the extent of the fall in Japanese economic output recently, which is larger than other advanced economies, and also given the need for international cooperation to revive the world economy,” Aso spokesman Osamu Sakashita said on Wednesday.
Since taking office in September, Aso has repeatedly said that restoring Japan’s economy is the top priority of his government. The country, meanwhile, has fallen deeper into recession amid an unprecedented collapse in global demand for its cars and gadgets.
The new package will help contract workers and small businesses, boost regional economies, expand “green” technologies and support elderly care, Ministry of Finance spokesman Yasunaga Matsuki said earlier this week.
Part of the deal may include an incentive to encourage car purchases similar to the “cash for clunkers” program debated in US Congress. Japan, home for several major automakers, is considering giving ¥250,000 to consumers who trade in a car 13 years or older for a more fuel-efficient car.
The total size of the extra budget will likely top ¥56 trillion, which will include other measures such as tax cuts and credit guarantees for businesses, Kyodo said.
Lawmakers last month passed a record ¥88.5 trillion budget for the fiscal year that started on April 1, which included parts of Aso’s two previous stimulus packages.
Officials have declined to comment on where they would find extra money, though Aso said recently that he would turn to issuing bonds if needed.
Japan’s massive public debt now runs at 170 percent of GDP — the highest level among industrialized economies.
Local media said lawmakers will likely tap into special reserve funds as well as issue new bonds.