Japan in $490 billion stimulus package

Japan in $490 billion stimulus package

Kanako Mita and Noriko Watanabe

Modern Tokyo Times

Prime Minister Fumio Kishida of Japan announced a massive $490 billion economic stimulus package. Thus the mountain of debt will continue to mushroom under the ruling Liberal Democratic Party (LDP)

Kishida said, “The economic measures are designed to overcome rising prices and to achieve an economic recovery… We will protect the people’s lives, jobs, and businesses – and strengthen the economy for the future.”

Kishida continued, “We will spend 6 trillion yen in total on energy-related steps and extend support worth 45,000 yen to each household.”

Reuters reports, “The amount includes subsidies to cut household electricity bills by roughly 20% from January to September next year, according to a draft of the package obtained by Reuters.”

Roughly $200 billion (29 trillion yen) dollars will focus on the effects of increased inflation on household budgets. Hence, the ruling LDP fears a pending sluggish economy without government support. 

Kyodo News reports, “The massive spending plan comes despite the country’s tattered public finances, with most of the necessary funds likely to be secured by issuing government bonds.”

East Asia Forum (Professor Toshiro Nishizawa – University of Tokyo) reports, “Affordability matters for government debt because the burden is eventually passed onto current and future taxpayers through tax hikes or inflation. Japan’s general government gross debt was 263 per cent of GDP at the end of 2021. Borrowing may seem affordable as long as the average yield is close to zero, but low interest rates are no longer sustainable as Japan falls behind global monetary tightening trends.”

Lee Jay Walker says, “The Bank of Japan is in a self-induced straightjacket. Hence, while America, the European Union, the United Kingdom, and so forth, are increasing interest rates to counter inflation: Japan can’t afford to follow. After all, the enormous debt would put mega strains on the economy at a reasonable interest rate.” 

Reuters reports, “Japan’s debt servicing costs would exceed 30 trillion yen ($261 billion) for the first time ever in fiscal 2025 if interest rates rise by 1% more than expected, a draft of the Ministry of Finance’s (MOF) estimates…”

The highest national debt in the world belongs to Japan. This concerns the endless mismanagement of the economy by the ruling LDP. Not content, the government is also involved in the unhealthy buying of Japanese Government Bonds (JGBs) via the Bank of Japan (BOJ) at a high rate – while the BOJ and the Government Pension Investment Fund (GPIF) hold roughly one-eighth of the market capitalization of the Tokyo Stock Exchange (the First Section).

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