Japanese PM Shinzo Abe tells Cabinet to compile stimulus package to support economy

High-rise buildings are seen at the Shinjuku business district during sunset in Tokyo, Japan on May 31, 2018. Japanese policymakers have been under pressure to fend off heightening overseas risks with a diminishing toolkit.
High-rise buildings are seen at the Shinjuku business district during sunset in Tokyo, Japan on May 31, 2018. Japanese policymakers have been under pressure to fend off heightening overseas risks with a diminishing toolkit. PHOTO: REUTERS

TOKYO (REUTERS) - Japanese Prime Minister Shinzo Abe on Friday (Nov 8) asked his Cabinet to compile a package of stimulus measures to support the economy and build infrastructure to cope with large natural disasters, the government's top spokesman said.

Chief Cabinet Secretary Yoshihide Suga told reporters that the package will include steps to promote investment for growth through aggressive use of fiscal investment and loan programmes.

The government will compile the package as soon as possible, though the size of spending will depend on proposals to be made by various ministries, Economy Minister Yasutoshi Nishimura told a news conference after a regular Cabinet meeting.

"I've received an instruction from the prime minister to compile a new economic package to guard against the chance overseas risks may hurt Japan's economy," he said.

Japanese policymakers have been under pressure to fend off heightening overseas risks with a diminishing toolkit, as the US-China trade war and soft global demand hurt the export-reliant economy.

Finance Minister Taro Aso said the planned economic package should help enhance productivity and achieve strong growth to overcome the pressure caused by the declining population, which he said was the "biggest problem" Japan faces in the long run.

Mr Aso added that the size and scope of the stimulus still needed to be worked out. He suggested that a supplementary budget would be compiled by the year-end, along with an annual budget for the next fiscal year that starts in April 2020, to ensure the economic package would be rolled out seamlessly over a 15-month period.

Mr Abe had told a top economic council on Thursday that the government will consider what policy measures it can take to prevent intensifying global risks from derailing the export-reliant economic recovery.

Japan's economic growth likely slowed to an annualised 0.8 per cent in July-September from 1.3 per cent in the second quarter, a Reuters poll showed this week. The data will be reported on Nov 14.

 
 
 

An increase in the sales tax to 10 per cent from 8 per cent, put in place from October, could also hurt consumption, analysts say.

Slowing growth underscores the challenge for Mr Abe's government as it tries to strike a delicate balance between the need to boost growth and fix the industrial world's heaviest public debt burden that is more than twice the size of Japan's US$5 trillion (S$6.8 trillion) economy.

Some economists worry that additional public works spending would further strain the nation's dire public finances and aggravate a labour crunch in a fast-ageing population.