Khaberni - In a move representing the first major economic initiative by Japanese Prime Minister Sanai Takaichi, the Japanese government approved a large-scale stimulus package valued at 21.3 trillion yen ($136 billion), which is the "largest supplementary expenditure since the Corona pandemic," at a time when global market concerns about the course of Japan's financial policy are increasing.
The package includes public account expenditures valued at 17.7 trillion yen ($113 billion), compared with 13.9 trillion yen ($88.8 billion) last year, and also includes 2.7 trillion yen (approximately $17.2 billion) in tax reductions.
The Yen Drops and Bond Yields Rise
The increasing concern about "the deteriorating financial situation" in Japan as a result of the generous package has led to the yen dropping to its lowest level in 10 months, while long-term government bond yields have jumped to record levels, reflecting a direct reaction from investors to the new prime minister's expansionary policy.
The Prime Minister affirmed that the package "takes into account financial sustainability completely," adding, "We will use higher-than-expected tax revenues and non-tax income, and any shortfall will be covered by issuing additional government bonds."
However, she also emphasized that the total bonds to be issued "will be less than last year after the supplementary budget that reached 42.1 trillion yen (about $269 billion)."
Massive Stimulus to Tackle Inflation and Support Families
11.7 trillion yen (about $74.7 billion) will be allocated to mitigate the burdens of rising prices, including support for gas and electricity bills for Japanese households for three months until March next year, in addition to a one-time cash grant of 20,000 yen (about $128) per child, on top of 2 trillion yen (about $12.8 billion) to support the provinces.
Takaichi said, "We have prepared this package to protect livelihoods and to respond urgently to the problem of inflation."
The Japanese government is addressing the chronic inflation problem, which led to the overthrow of the previous government, where the main price index has stabilized at 2% or exceeded it for the 43rd consecutive month, the longest period since 1992.
Supplementary Budget Before the End of the Year
The government will finalize the supplementary budget to fund the package by November 28, aiming to pass it in parliament before the end of the year.
The volume of additional bonds to finance the package has not yet been determined, but according to Reuters sources, it is expected to be larger than the 6.69 trillion yen ($42.7 billion) issued for stimulus last year.
A Complex Scene
Reports from Japan reveal a complex political and economic landscape, with a new government accelerating spending to combat inflation and disenchantment among voters, against financial markets worried about worsening public debt, a local currency at its lowest level in 10 months, and government bonds recording unprecedented yields.
Although Takaichi asserts the soundness of the fiscal approach, market responses show that "financial expansionism" may be a double-edged sword in Japan, one edge being socio-economic and the other financial, closely watched by investors.
