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Japan‘S wardrobe It approved a 21.3 trillion yen ($135.4 billion) stimulus package on Friday to stimulate the economy through expansionary government spending and relieve the impact of higher prices.
After assuming office last month, the Prime Minister Sanae Takaichi He pledged to boost government spending despite concerns that such steps would delay progress in reducing Japan’s national debt, which is nearly three times the size of its economy.
The spending package is far larger than pre-COVID-19 pandemic years and is also partly aimed at blunting the impact of higher US tariffs on Japanese exports to the US under President. donald trump,
Exports to the US declined for the seventh consecutive month in October, although exports to the rest of the world rose 3.7%, partly due to higher exports to the rest of Asia, the government said on Friday.
In recent days, investors have sold Japanese government bonds, pushing yields higher while the yen fell to its lowest level this year.
Share prices were also hit by renewed friction with China following comments made by Takaichi that angered Beijing, leading to retaliatory measures including an advisory warning Chinese tourists and students against visiting Japan.
The lavish spending package approved Friday includes subsidies for energy costs, a gasoline tax cut and other measures to help consumers struggling with the rising cost of living. The government reported on Friday that core inflation excluding volatile food costs stood at 3% in October, above the central bank’s target of around 2%.
Typical subsidies include a one-time cash distribution of 20,000 yen (about $130) per child, which would require about 400 billion yen (2.6 billion dollars) in government funding, and the issuance of rice vouchers or other coupons worth 3,000 yen (about $20) per person to be distributed by local authorities.
Takaichi’s government must prepare a supplementary budget to finance the package and seek approval from parliament by the end of this year. This poses a major challenge to his ruling coalition, which lacks a majority in both the upper and lower houses of the Diet.
Takaichi succeeds former Prime Minister Shigeru Ishibawho were virtually ousted by their rivals in the ruling party after losing key elections due to voter dissatisfaction over their minority government’s slow response to rising prices and low wages.
As Japan’s first female prime minister, Takachi has so far received a high level of public support, largely due to expectations that she could shake up Japan’s non-democratic politics. But since they have a minority government, they need the support of opposition parties to pass their supplementary budget and spending package.
Opposition lawmakers and experts have questioned whether the package will be effective in achieving its goals. One of which is to lower consumer prices a bit by cutting energy costs. Any impact on inflation is expected to be transitory as demand boosted by other stimulus will push prices higher.
The package also aims to boost Japan’s gross domestic product by 24 trillion yen ($155 billion), or an annual rate of 1.4%, according to the Cabinet Office.
Japan’s economy, the world’s fourth-largest, shrank at a 1.8% annual pace in July-September.