Japanese Prime Minister Shinzo Abe has ordered Cabinet ministers to prepare an extra spending package, including cash handouts for the poorest pensioners, seeking to breathe fresh life into Japan’s stalling recovery.
The amount of the supplementary budget has not been decided, the chief government spokesperson, Yoshihide Suga, said yesterday after the Cabinet met.
Local media said the package is likely to exceed ￥3 trillion (US$24.5 billion) and would be prepared next month, for approval early next year.
Photo: Reuters
It is likely to include one-time subsidies of ￥30,000 for cash-strapped pensioners.
Suga said it is also to include provisions to help farmers improve their competitiveness as Japan opens its markets further as part of the Trans-Pacific Partnership.
Suga said the measures are part of broader plan announced by Abe to increase Japan’s GDP to ￥600 trillion by 2020.
The extra spending aimed at farmers and seniors, bastions of support for Abe’s Liberal Democratic Party, are also likely to find favor among voters ahead of an election next summer.
Japan slipped into a mild recession in the spring. Although the jobless rate fell to a 20-year low of 3.1 percent last month, according to data released yesterday, consumer spending and incomes also edged down as the tight labor market failed to spur significant increases in wages.
Abe has proposed a raft of policies meant to help workers cope with child and elder care, part of a “mobilization to ensure active participation of all members of society.”
Ultimately, the fate of his “Abenomics” approach, which has relied heavily on pumping cash into the economy, hinges on getting consumers and companies to spend more and thus boost demand.
So far, short-handed employers have resorted to use of overtime and hiring more temporary workers, seeking to avoid increases in base wages that would be difficult to reverse if the economy takes a turn for the worse.
Household spending fell 2.4 percent last month from the year before, and average incomes fell 0.9 percent, yesterday’s data showed.
Japan’s inflation rate was also lower last month, with core inflation excluding volatile food prices down 0.1 percent for the third month in a row.
Abe has called for raising Japan’s minimum wage, which is now at a modest ￥798 per hour on average, by 3 percent a year, aiming to get it up to ￥1,000 per hour by 2020.
Big companies, reaping record profits thanks to strong export earnings, can afford that.
However, most people who receive minimum wage work for small and medium-size companies that cannot afford to pay more, JPMorgan Chase & Co economist Masamichi Adachi said.
“Those small tiny firms, which are always losing money and don’t pay taxes, are not making money at all. If they have to raise wages their losses will grow and they will find it hard to survive,” he said.
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