Yoshihide- Japan Is Eyeing Another Massive Stimulus Package (But There Is a Problem)
Stimulus packages, to deal with the effects of the pandemic and related economic troubles, haven’t only been for the United States. Several countries, including India, Pakistan, the Philippines, Ireland, and the European Union, have either already instituted stimulus or have announced plans to do so soon.
Another country in the process of putting together a stimulus package is Japan.
Reuters, citing Nikkei, reported this week that Japanese Prime Minister Yoshihide Suga “is likely to compile another big economic stimulus package before calling a snap election in September.”
Per the report, Japan’s opposition has called for a package of 30 trillion yen ($274 billion), although it’s not clear how much Prime Minister Suga will ultimately seek.
Japan has passed multiple stimulus packages since the start of the pandemic. According to a report last month by Nikkei, more people in Japan spent their stimulus money on savings than spending.
“With the vaccine rollout stalled and Japan’s latest state of emergency extended to the end of May, the country’s economic recovery trails that of the U.S. and other nations,” that May Nikkei report said.
“The output gap seems to be a benchmark when the government compiles a stimulus package, so the next one could be sized around 20-30 trillion yen or even bigger,” said Toru Suehiro, a senior economist at Daiwa Securities, told Reuters.
“But the immediate boost to growth may be limited, as most spending will be for safety nets and steps like digitalization and green investment that take long for the effect to appear,” Suehiro added.
Tokyo is set to host the Summer Olympics, beginning on July 23, after the games were delayed from 2020 due to the pandemic. There has been much controversy over whether it is responsible to go ahead with the games when the pandemic is still not entirely over, although President Biden told Prime Minister Suga earlier this week that he supports the Olympics taking place as scheduled, Reuters reported.
As of earlier this year, Japan had a debt of about $12 trillion as of the end of 2019, a figure that has likely grown since with the pandemic and subsequent stimulus packages, including the government of former Prime Minister Shinzo Abe passage of an ambitious program called the Digital New Deal. In fact, Japan’s debt has been larger than its GDP for more than twenty years.
The S&P, earlier this year, lowered its outlook on Japan’s sovereign debt from “positive” to “stable.” The agency also retained its A+ long-term and A-1 short-term sovereign credit ratings for Japan
“Japan’s weak government finances have deteriorated further in fiscal 2020 owing to the COVID-19 pandemic,” S&P said. “The fiscal position should improve materially once the outbreak recedes and economic growth returns. Nevertheless, we expect the fiscal deficit will remain relatively high.”
Stephen Silver, a technology writer for The National Interest, is a journalist, essayist, and film critic, who is also a contributor to The Philadelphia Inquirer, Philly Voice, Philadelphia Weekly, the Jewish Telegraphic Agency, Living Life Fearless, Backstage magazine, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. Follow him on Twitter at @StephenSilver.