Japanese Prime Minister Shinzo Abe’s cabinet approved a ¥28.1 trillion ($274 billion) economy stimulus package on Tuesday. Yet, much of the 28 trillion yen will not be spending but lending. Only 7.5 trillion yen will be direct fiscal spending over the next two years.
Abe expected the new stimulus will boost economy growth by 1.3%, while Koya Miyamae, economist with SMBC Nikko Securities, said he expects it to boost growth by 0.4% in the current fiscal year ending in March, according to Wall Street Journal.
According to Bloomberg, 13.5 trillion yen fiscal measures include: 3.4 trillion yen for improving population structure, 6.2 trillion yen for infrastructure, 1.3 trillion yen for relieving negative impacts of Brexit and helping small-to-medium enterprises, and 2.7 trillion yen for Kumamoto earthquake.
People skeptical about Abenomics said that Abe should focus on reforming economy structure rather than announcing useless stimulus. There have been a lot of stimulus packages in Japan economy since 1992, but none of them were as big as announced and helped Japan get rid of deflation and recession.
“We don’t need any fiscal stimulus,” Hideo Hayakawa, a former Bank of Japan official said to Bloomberg, “What we need is enhancement in productivity, thereby raising potential growth.”
The yen strengthened against dollar after details of the new stimulus package was released. The dollar was traded around ¥100.87 as of 3:46 on Tuesday.