TOKYO: Japan’s cabinet approved US$29 billion (RM101 billion) in fresh stimulus on Saturday for the ailing economy, pledging to get growth back on track and restore the precarious public finances.
Prime Minister Shinzo Abe is wrapping up his second year in office hard-pressed to salvage a recovery that fizzled into recession after a sales tax hike in April.
The stimulus plan endorsed by the cabinet includes 600 billion yen (RM17.4 billion) earmarked for stagnant regional economies.
It also lays out Abe’s vision for countering longer term trends such as Japan’s surging public debt and a declining and aging population.
“A strong economy is the wellspring of Japan’s national strength,” said a summary of the plan released by the government.
It pledged to restore vitality to local regions to enable young Japanese “to have dreams and hopes for the future”.
But the document also acknowledged the narrow policy options open to Japan’s leaders given the country’s massive public debt, which is twice the size of the economy.
The government is sticking to its pledge to balance its budget by 2020, despite a recent decision by Abe to defer a tax hike due for next year until April 2017.
Abe has sought to spur growth and end a long spell of deflation through aggressive monetary easing and increased public spending. He also promised to undertake bold steps to break through the “bedrock” of Japan’s vested interests and bureaucracy, but has made little headway in areas such as labour and farm sector reforms.
After taking office for a third term following a snap election earlier this month, he faces growing pressure to show that his “Abenomics” strategy for nurturing growth through inflation can succeed.
The Democratic Party of Japan, the leading opposition party, issued a statement on Saturday expressing its disappointment with the stimulus plan, which it said relied on old pork barrel tactics that have failed in the past.
It said DPJ lawmakers would push for policies “investing in people” to help improve incomes and boost growth.
Japan’s central bank is buying up to 80 trillion yen in assets each month, mostly government bonds, to help spur inflation, but so far has not attained its target of two per cent price increases overall.
Data released on Friday showed inflation eased slightly in November as incomes and household spending dropped.
Since wage increases have not kept pace with inflation, rising share prices and corporate profits have done little to stimulate consumer demand.
Overall, 1.2 trillion yen will go to consumers and businesses and 1.7 trillion yen is allocated for disaster prevention and reconstruction. AP