Japan approves $182 billion economic package, doubts remain

Thu Dec 5, 2013 5:22am EST
 
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By Stanley White

TOKYO (Reuters) - Japanese Prime Minister Shinzo Abe's cabinet approved a $182 billion package on Thursday to pull the economy out of deflation, but doubts remain about the impact.

The package has a headline value of 18.6 trillion yen ($182 billion), which is an exaggerated figure as the bulk of the package includes loans from government-backed lenders and spending by local governments that was already scheduled.

The core of the package is 5.5 trillion yen in spending measures which Abe ordered in October to bolster the economy ahead of a national sales-tax hike in April. The government does not have to sell new debt to fund this spending.

The package has raised concerns that Japan's government has not broken away from the stop-gap measures and piecemeal policymaking that some say has hampered long-term growth.

"Market participants want the government to focus even more energy on economic policy," said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities.

"Some of these items, like reconstruction from the earthquake, were already scheduled and don't really constitute an economic strategy."

The measures approved on Thursday will add 1 percentage point to gross domestic product and create around 250,000 jobs, according to the Cabinet Office.

There is a consensus that the sales tax hike will subtract about 2 trillion yen from gross domestic product, so 5.5 trillion yen in spending should more than compensate, Yasutoshi Nishimura, a senior vice minister at the Cabinet Office, told reporters.   Continued...

 
Japan's Prime Minister Shinzo Abe (L) addresses a meeting of the economy and fiscal policy council, next to Finance Minister Taro Aso (R), at Abe's office in Tokyo December 5, 2013. REUTERS/Yoshikazu Tsuno/Pool