The Japanese government will announce around 12 trillion yen ($136 billion) in fiscal stimulus this month to boost the nation’s shrinking economy, the Yomiuri newspaper said.
The extra budget for this fiscal year through March will include 5-6 trillion yen of public works spending, the Yomiuri reported Monday without saying where it obtained its information.
The spending package may help to accelerate a recovery from recession as Prime Minister Shinzo Abe pledges to boost growth and end deflation in the world’s third-largest economy.
While Japan’s public debt is more than twice gross domestic product, Finance Minister Taro Aso said last week that the government doesn’t need to adhere to a 44 trillion-yen cap on new bond issuance this fiscal year.
“The scale of this budget suggest that Abe’s new administration is serious about stimulating the economy,” said Masamichi Adachi, a senior economist at JPMorgan Securities in Tokyo and a former central bank official. “It’ll be very helpful in the near-time, but the problem in the medium-to-long term is that we have to pay this back.”
Gross domestic product shrank at an annualized 3.5 percent pace in the third quarter after contracting in the three months through June, meeting the textbook definition of a recession. The median estimate of analysts surveyed by Bloomberg News is for a further 0.5 percent fall in the three months through December.
Aso said last month that ministries should submit spending requests for the extra budget by Monday.
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