Japan preparing $120bn stimulus package to bolster fragile economy

Japan’s economic growth slumped to its weakest in a year in the third quarter. (File/AFP)
Updated 03 December 2019

Japan preparing $120bn stimulus package to bolster fragile economy

  • The package would come to around $120 billion), but that would rise to $230 billion when private-sector and other spending are included
  • The government was considering putting together a large-scale stimulus package with fiscal spending exceeding $92 billion

TOKYO: Japan is preparing an economic stimulus package worth $120 billion to support fragile growth, two government officials with direct knowledge of the matter said on Tuesday, and complicating government efforts to fix public finances.
The spending would be earmarked in a supplementary budget for this fiscal year to next March and an annual budget for the coming fiscal year from April. Both budgets will be compiled later this month, the sources told Reuters, declining to be identified because the package has not been finalized.
The package would come to around 13 trillion yen ($120 billion), but that would rise to 25 trillion yen ($230 billion) when private-sector and other spending are included.
The Nikkei business daily reported on the weekend that the government was considering putting together a large-scale stimulus package with fiscal spending exceeding $92 billion.
Japan’s economic growth slumped to its weakest in a year in the third quarter as soft global demand and the Sino-US trade war hit exports, stoking fears of a recession. Some analysts also worry that a sales tax hike to 10% in October could cool private consumption which has helped cushion weak exports.
Such spending could strain Japan’s coffers — the industrial world’s heaviest public debt burden, which tops more than twice the size of its $5 trillion economy.
Despite the headline size of the stimulus, actual spending would be smaller in the current fiscal year, and economists are not expecting much of a boost.
“We expect this fiscal year’s extra budget to total around 3-4 trillion yen. We should not expect it to substantially push up the GDP growth rate,” said Takuya Hoshino, senior economist at Dai-ichi Life Research Institute.
The 13 trillion yen includes more than 3 trillion yen from fiscal investment and loan programs, as the heavily indebted government seeks to take advantage of low borrowing costs under the Bank of Japan’s negative interest rate policy.
Direct government spending is expected to reach around 7-8 trillion yen, they said.
The government will mobilize construction bonds, unused money from the previous fiscal year’s budget and fiscal investment and loan programs to secure necessary funding, the Nikkei reported on Tuesday.
The spending package won’t involve deficit-covering bond issuance, the Nikkei added.
A final decision on the package could be made as early as Thursday.


Aramco profits fall in tough quarter, but sees partial recovery from COVID-19 impact

Updated 09 August 2020

Aramco profits fall in tough quarter, but sees partial recovery from COVID-19 impact

  • Aramco see’s “partial recovery” from pandemic impact
  • Aramco president says company remains resilient

DUBAI: Saudi Aramco, the world’s biggest oil company, reported a net income of $6.57bn for the second quarter of 2020, the period which witnessed the most volatile oil market conditions for many decades.

The result, announced to the Tadawul stock exchange in Riyadh where the shares are listed, compared with income of $24.7 bn last year.

Amin Nasser, president and chief executive, said: “Despite COVID-19 bringing the world to a standstill, Aramco kept going. We have proven our financial resilience and operational reliability, setting a record in our business operations, while at the same time taking steps to ensure the health and safety of our people.”

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Aramco’s dividend - a big attraction for the investors who bought into the world’s biggest initial public offering last year - will remain as pledged, Nasser added. Cash flow in the quarter amounted to $6.106 bn.

““Strong headwinds from reduced demand and lower oil prices are reflected in our second quarter results. Yet we delivered solid earnings because of our low production costs, unique scale, agile workforce, and unrivalled financial and operational strength. This helped us deliver on our plan to maintain a second quarter dividend of $18.75 billion to be paid in the third quarter,” he said.

Aramco said the loss was “mainly reflecting the impact of lower crude oil prices and declining refining and chemicals margins, partly offset by a decrease in production royalties resulting from lower crude oil prices and a decrease in the royalty rate from 20 per cent to 15 per cent, lower income taxes and zakat as a result of lower earnings, and higher other income related to sales for gas products.”

Sales and revenue in the period - which saw oil prices collapse on “Black Monday” in April - fell 57 per cent to $32.861 bn from the comparable period last year. 

Nasser said he was cautiously optimistic that the world economy was slowly recovering from the depths of the pandemic lockdowns.

“We are seeing a partial recovery in the energy market as countries around the world take steps to ease restrictions and reboot their economies. Meanwhile, we continue to place people’s safety first and have adapted to the new normal, implementing wide-ranging precautions to limit the spread of COVID-19 wherever we operate.

“We are determined to emerge from the pandemic stronger and will continue making progress on our long-term strategic journey, through ongoing investments in our business – which has one of the lowest upstream carbon footprints in the world,” he added.

Aramco expects capital expenditure to be at the lower end of the $25bn to $30bn range it has already indicated for this year.