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.


Capitalism doing ‘more harm than good’ says global survey

Updated 41 min 4 sec ago

Capitalism doing ‘more harm than good’ says global survey

  • The poll contacted over 34,000 people in 28 countries

LONDON: A majority of people around the world believe capitalism in its current form is doing more harm than good, a survey found ahead of this week’s Davos meeting of business and political leaders.

This year was the first time the “Edelman Trust Barometer,” which for two decades has polled tens of thousands of people on their trust in core institutions, sought to understand how capitalism itself was viewed.

The study’s authors said that earlier surveys showing a rising sense of inequality prompted them to ask whether citizens were now starting to have more fundamental doubts about the capitalist-based democracies of the West.

“The answer is yes,” David Bersoff, lead researcher on the study produced by US communications company Edelman. “People are questioning at that level whether what we have today, and the world we live in today, is optimized for their having a good future.”

The poll contacted over 34,000 people in 28 countries, from Western democracies like the US to those based on a different model such as China or Russia, with 56 percent agreeing “capitalism as it exists today does more harm than good in the world.”

The survey was launched in 2000 to explore the theories of political scientist Francis Fukuyama, who after the collapse of communism declared that liberal capitalist democracy had seen off rival ideologies and so represented “the end of history.”

That conclusion has since been challenged by critics who point to everything from the rising influence of China to the spread of autocratic leaders, trade protectionism and worsening inequality in the wake of the 2007/08 global financial crisis.

On a national level, lack of trust in capitalism was highest in Thailand and India on 75 percent and 74 percent respectively, with France close behind on 69 percent. Majorities prevailed in other Asian, European, Gulf, African and Latin American states.

Only in Australia, Canada, the US, South Korea, Hong Kong and Japan did majorities disagree with the assertion capitalism currently did more harm than good.

FASTFACT

75%

The Edelman Trust Barometer survey found lack of trust in capitalism was highest in Thailand and India on 75 percent and 74 percent respectively.

The survey confirmed a by-now familiar set of concerns ranging from worries about the pace of technological progress and job insecurity, to distrust of the media and a sense that national governments were not up to the challenges of the day.

Within the data there were divergences, with Asians more optimistic about their economic prospects than others across the world. There was also a growing split in attitudes according to status, with the affluent and college-educated much more likely to have faith in how things were being run.

Of possible interest to corporate leaders gathering in Davos this week was the finding that trust in business outweighed that in governments and that 92 percent of employees said CEOs should speak out on the social and ethical issues of the day.

“Business has leapt into the void left by populist and partisan government,” said Edelman CEO Richard Edelman. “It can no longer be business as usual, with an exclusive focus on shareholder returns.”