Japan’s cabinet has approved a $122 billion fiscal stimulus package, its first since 2016 and one of the largest in the world, as the country seeks to revive GDP growth after its economy stalled throughout the summer and fall.
“For the first economic stimulus of the Reiwa era, we’ve been able to put together a suitably powerful package,” Prime Minister Shinzo Abe said, in remarks to officials, before a cabinet decision on the package.
Abe said the stimulus would be used to repair typhoon damage and make infrastructure upgrades. It also includes funding for young scientists and “moonshot” technology projects.
“Now is the time to adopt bold fiscal policy to overcome various downside risks and secure future safety while the Bank of Japan is patiently continuing powerful monetary easing,” the government said.
In October, Abe’s government increased the sales tax to 10% from 8%, sending retail sales falling at their fastest rate in more than four years.
The stimulus could drive up GDP by 1.4% through 2021, analysts said. Abe said the package was part of an “investment for a future beyond the Tokyo Olympics and Paralympics.” Japan is hosting the Olympic Games in the summer of 2020.
Moody’s economist Steve Cochrane said Japan had limited options for dealing with the slowdown through monetary policy.
“If it’s infrastructure spending or spending on education and training for either young people or retraining the older generation that is staying in the labor force longer — these are activities that would provide near-term juice for the economy but maybe have long-term impact as well,” Cochrane said.
Japan has the largest public debt in the world at roughly twice its GDP.
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