Japan's economy

Tokyo considering $134b stimulus

At least 10 trillion yen (S$134 billion) is on the table to spur the Japanese economy, if it continues to falter following Britain's divorce from the European Union.

The stimulus package, slated to be presented in autumn, was discussed on Saturday in the first of two urgent meetings held between the government and the central bank since last Friday.

The sum is the largest since 10.3 trillion yen was injected as part of Prime Minister Shinzo Abe's "Abenomics" policy in January 2013.

The pillars of the latest package will include measures to spur consumer spending and support infrastructure projects, the Yomiuri Shimbun daily reported yesterday.

The market rout had offered plenty of ammunition for Japan's opposition parties ahead of an Upper House election on July 10, with Democratic Party chief Katsuya Okada saying in a statement: "The Abenomics party is over."

He added that the rise of the yen and steep fall in stock prices reinforced the failure of Abenomics to halt decades of deflation and generate sustainable growth.

Early yesterday, Mr Abe called an emergency meeting with the Bank of Japan in a bid to calm markets before they opened.

He told reporters: "We must take all measures to ensure that this situation does not impact the real economy of Japan."

This has been widely perceived to mean that currency intervention may be on the cards to stabilise the yen. The currency continued its climb yesterday, strengthening 0.1 per cent to 102.11 to the dollar as investors flocked to the safe haven.

A strong yen makes exports less competitive, further stressing the Japanese economy.

But the Nikkei 225 share index rallied yesterday after plunging nearly 8 per cent last Friday, closing up 2.4 per cent.

Taiwan Premier Lin Chuan also called a meeting yesterday to discuss the repercussions of Brexit. The Finance Ministry forecast a "limited short-term effect" on exports, while a National Stabilisation Fund of NT$500 billion (S$21 billion) may be authorised to cushion the stock market.

Meanwhile, Chinese Premier Li Keqiang told the World Economic Forum in Tianjin yesterday that the vote "has showed its impact on the international market and further increased uncertainties in the global economy".

Despite Brexit, he said, China will be able to maintain medium to high growth rates and has room to apply proactive fiscal measures.

"China hopes to see a united, steady EU and a stable and prosperous United Kingdom," Mr Li said, calling on nations to improve policy coordination.

"No country can depart from the world economy to promote development of itself. So we need to join forces."

A version of this article appeared in the print edition of The Straits Times on June 28, 2016, with the headline 'Tokyo considering $134b stimulus'. Print Edition | Subscribe