Ja­pan approves mas­sive stim­u­lus to fire up econ­omy

The Myanmar Times - - International Business -

JA­PAN’S cabi­net yes­ter­day ap­proved a mam­moth 28tril­lion yen (US$273 bil­lion) pack­age in its lat­est at­tempt to stim­u­late lack­lus­tre growth, in­clud­ing cash to im­prove in­fra­struc­ture and raise the birthrate in the age­ing na­tion.

The stim­u­lus plan an­nounced last week is the lat­est in a series in re­cent years de­signed to fire up the world’s num­ber-three econ­omy.

“We have been able to put to­gether a strong pack­age that in­cludes bold in­vest­ment for the fu­ture,” Prime Min­is­ter Shinzo Abe said be­fore the cabi­net meet­ing which gave it the green light.

It in­cludes 6.0 tril­lion yen in low­in­ter­est loans and just 7.5 tril­lion yen in fresh spend­ing – about one quar­ter of the to­tal – by the na­tional and lo­cal gov­ern­ments over the next sev­eral years.

About 4.6 tril­lion yen is for spend­ing in the cur­rent fis­cal year end­ing March 2017. The pack­age is ex­pected to be ap­proved by par­lia­ment next month.

It comes after the Bank of Ja­pan dis­ap­pointed mar­kets with mod­est tweaks to its own stim­u­lus mea­sures on July 29.

The gov­ern­ment’s stim­u­lus in­cludes help for small firms ex­pected to be hit by Bri­tain’s vote last month to exit the Euro­pean Union.

About 1000 Ja­panese com­pa­nies, big and small, do busi­ness in Bri­tain and many use Lon­don-based of­fices as a stag­ing point for the Euro­pean mar­ket.

Bri­tain’s shock vote to leave the EU also sparked a rally in the yen as in­vestors flocked to an as­set seen as a safe haven.

A stronger cur­rency hits the repa­tri­ated prof­its of Ja­pan’s ex­porters and makes their prod­ucts more ex­pen­sive overseas.

Cash pay­outs to low-in­come earn­ers and for dis­as­ter re­lief were also on tap, with money set aside for ar­eas of south­ern Ja­pan hit by deadly quakes in April that left 49 dead and caused wide­spread dam­age.

Some funds would also be tapped for ar­eas hit by 2011’s quake-tsunami dis­as­ter.

Tens of bil­lions of dol­lars are ear­marked for in­fra­struc­ture spend­ing, me­dia said, in­clud­ing the first leg of a new ma­glev train line from Tokyo to Nagoya, about 290 kilo­me­tres (180 miles) away.

The ma­glev – short for “mag­netic lev­i­ta­tion” – can hit a top speed of over 600 kilo­me­tres an hour.

Money will also be used to fund day-care cen­tres and nurs­ing homes as Tokyo tries to boost the birthrate and the work­force in the rapidly age­ing na­tion.

“What Ja­pan needs to do is to spur more demand and in­crease pro­duc­tiv­ity by push­ing through dereg­u­la­tion, in­creas­ing the na­tion’s po­ten­tial growth rate,” said No­mura Se­cu­ri­ties econ­o­mist Masaki Kuwa­hara.

Mizuho Se­cu­ri­ties said be­fore the pack­age was con­firmed that it was likely to un­der­whelm.

“There is noth­ing ground­break­ing here,” it said of de­tails re­ported in Ja­panese me­dia.

Doubts are grow­ing over a more than three-year-old bid by Mr Abe to spur growth, dubbed Abe­nomics, as Ja­pan’s so­cial wel­fare costs in­flate one of the world’s big­gest na­tional debts.

Abe­nomics – a mix­ture of mas­sive mone­tary eas­ing, gov­ern­ment spend­ing and red-tape slash­ing – had brought the yen down from record highs and made Ja­pan’s ex­ports more competitive. But that has not been enough to de­liver con­sis­tent growth. –

Photo: EPA

Shinzo Abe pushes for growth.

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