Japan to launch $140 billion stimulus package

Japanese authorities are set to provide additional support to people, especially low-income households and those with young children.

Japanese broadcaster NHK reported on November 21 that the country is considering injecting 21.9 trillion yen (over $140 billion) to cushion the impact of rising prices on households. If private capital is included, the package would be worth 39 trillion yen.

The stimulus package will include a 30,000 yen handout for low-income households, which will be tax-free, and families with children will receive 20,000 yen per child, Reuters reported, citing people familiar with the matter.

The main hurdles to the package have been cleared, with the ruling coalition agreeing with the opposition on a draft. The stimulus package could be approved by Japan’s cabinet on November 22.

People cross the street in Shinjuku district (Tokyo). Photo: Reuters

"I'm not sure whether a stimulus package of this size is necessary at this point, as consumption is showing signs of picking up and wages are also rising," said Takayuki Sueyoshi, an economist at Daiwa Research Institute.

Japan grew 0.9% in the third quarter. Consumer spending, which accounts for half the economy, rose 3.6%.

Sueyoshi said the package would make it harder to achieve a fiscal surplus. In July, the Japanese government estimated it would achieve a primary budget surplus (excluding interest payments) of 0.8 trillion yen in fiscal 2025. That would require tax revenues to exceed government spending.

Japan has previously used supplementary budgets (usually several trillion yen) to cover one-time emergency expenses, such as natural disasters. However, that changed in 2020, when spending on dealing with the pandemic reached 73 trillion yen.

Since then, the country has had to issue bonds to raise large-scale supplementary budgets. Last year, the Japanese government issued bonds worth nearly 9 trillion yen.

The International Monetary Fund (IMF) has repeatedly warned Japan to stay within its budget rather than issue more debt. It has urged the government to get its finances in order as the central bank has begun the process of raising interest rates. Japan's public debt is now twice the size of its GDP.