Japan’s government yesterday unveiled US$81 billion in new stimulus spending to keep the world’s second-biggest economy from lurching back into recession.
Despite shrinking tax revenue, Japanese Prime Minister Yukio Hatoyama and his Cabinet agreed to ¥7.2 trillion (US$80.6 billion) in new spending after days of negotiations with coalition partners. The announcement had been expected on Friday, but was delayed by wrangling over the size of the plan.
The largess underlines that the world’s biggest economies are still too fragile to get by without government life support even as a recovery from the global recession takes shape.
The new Japanese package is Hatoyama’s first major policy deal since his Democratic Party of Japan swept into power this summer promising help for workers and families. The previous government under former Japanese prime minister Taro Aso injected ¥25 trillion in stimulus spending.
The government’s latest package includes measures to bolster employment, extend consumer incentives to buy eco-friendly products and provide support for small and medium-size firms hurt by the strong yen.
The measures will be financed by the second extra budget for this fiscal year through March 31. Japanese Finance Minister Hirohisa Fujii said he expects the Cabinet to approve the supplementary budget next week.
He also warned that Japan’s tax revenue will tumble to ¥36.9 trillion this fiscal year, about ¥9.2 trillion below initial projections.
Japan’s public debt, the biggest in the world, will surpass revenue for the first time since 1946.
“Our country’s finances are in an extremely serious state,” Fujii said yesterday.
Hatoyama has repeatedly said he wants to limit the amount of bonds the government issues. For the stimulus package, the government will mainly tap into money saved after it froze “wasteful” projects undertaken by the previous administration.
The tax shortfall, however, will likely push government bond issuance to a record ¥53.5 trillion this year, Fujii said.
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