Over the past year, the Japanese government has deployed massive stimulus packages totalling $3 trillion. The stimulus which was used to combat the pandemic added to the biggest debt pile among major economies.
Notably, a record 30.8 trillion yen was left over from the previous fiscal year’s budget, Ministry of Finance data showed on Friday and 4.7 trillion yen was set aside for public works spending.
However, the government eyes a fresh stimulus package with the spike in COVID-19, which also prompted Japan to expand states of emergency on Friday to three prefectures near Tokyo and the western prefecture of Osaka.
On Friday, economy minister Yasutoshi Nishimura said Japan will act “without hesitation” to cushion the economic blow from the COVID-19 pandemic. That said, the government shows its readiness for a new stimulus package.
The current crisis is weighing on Japan’s fragile economic recovery and growth, and the states of emergency will further delay its economic upturn.
Vaccinations in Japan have been reported to be slow, and Prime Minister Yoshihide Suga’s handling of the pandemic has impacted his support ratings negatively. Suga is under pressure to deploy another stimulus package. With the general elections set for later this year, the move will appeal to voters, as well.
A Formal Stimulus Package Proposal in September
Lawmakers have escalated calls for a new relief package. The ruling party’s Toshihiro Nikai was floating the idea of an extra budget of around 30 trillion yen ($274 billion).
Nishimura told a parliament hearing on the government’s pandemic response, that they will pay close attention to economic conditions, including the impact from infections and state of emergency curbs. He said he is in close consultation with the prime minister and they are ready to take macro-economic policy steps without hesitation.
Reports on Thursday said that Suga will soon instruct his administration to compile another stimulus package, which is to be funded from an extra budget to be passed through parliament after the elections.
According to reports, the ruling Liberal Democratic Party will create a formal proposal on the stimulus package in early September.
Meanwhile, Japan policymakers appeared steadfast even with the increasing global debate on withdrawing stimulus. Moreover, some were calling to avoid a premature tightening of monetary policy, according to the July meeting summary.
In the stock market, Tokyo stocks ended sharply lower on Friday. The Nikkei index has fallen to its lowest level in around seven months.