Japan’s small government on Friday signed off on a $140 billion stimulus package aimed at putting more money into consumers’ pockets after the ruling party’s worst election result in 15 years.
The October 27 runoff saw voters — angry at the Liberal Democratic Party’s (LDP) corruption and inflation — strip new Prime Minister Shigeru Ishiba’s coalition of a majority in the lower house of parliament.
The 21.9 trillion yen ($141.8 billion) package includes donations of about 30,000 yen to low-income households, fuel and energy subsidies, and aid to small businesses, according to the government.
The overall business impact was expected to be 39 trillion yen.
“The goal is to reach an economy where wage growth slightly outpaces price growth and ensure the transition to a growth-oriented economy driven by wage increases and investment,” the statement said.
To pay for this package, for the second time in as many years, the government will present a supplementary budget at the end of the year in the lower house.
But opinions about the movement of people on the streets were different.
Voter Katsuhiro Hirakawa, 63, accused politicians of making “whatever decisions they want without listening to the voices of our ordinary citizens”.
Authorities should “think carefully about why they need more tax money, or how to reduce wasteful spending, before making decisions on the budget”, he told AFP in Tokyo.
And Hisaki Sato, 46, wanted more help for the middle class, adding: “Now we live in a time when not only low-income families but low-income families need ways to revive.”
The middle class is “home to many people who contribute directly to the economy, so I want the government to love them too”.
– A mountain of debt –
In order to gain enough support from lawmakers, Ishiba agreed to include the removal of the income tax cap pushed by the opposition Democratic Party for the People (DPP).
A minority group says this will ease labor shortages and boost consumer spending by encouraging part-time workers to work longer hours and earn more.
But critics worry that this will cut tax revenue by billions of yen and increase Japan’s debt pile, which is more than 200 percent of gross domestic product.
With the Bank of Japan expected to continue raising interest rates, this mountain of debt will be more expensive, said SMBC Nikko Securities economist Yoshimasa Maruyama.
Tax cuts “must be accompanied by a permanent source of revenue to fill the gap”, Maruyama wrote in a research paper.
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