TOKYO, June 10 ― Japanese Prime Minister Yoshihide Suga is likely to compile another big economic stimulus package before calling a snap election in September, the Nikkei newspaper said today, although most major economies have scaled back crisis-mode policies to combat the coronavirus.
Opposition parties have called for a package sized around ¥30 trillion (RM1.13 trillion), a proposal Suga brushed aside in a debate with their leaders on Wednesday.
While the Nikkei did not report the expected size of the package, some analysts put a ballpark figure of ¥20-30 trillion as it would be enough to fill Japan's output gap ― or the estimated size of slack in the economy.
“The output gap seems to be a benchmark when the government compiles a stimulus package, so the next one could be sized around ¥20-30 trillion or even bigger,” said Toru Suehiro, a senior economist at Daiwa Securities.
“But the immediate boost to growth may be limited, as most spending will be for safety nets and steps like digitalisation and green investment that take long for the effect to appear.”
Tokyo has deployed massive stimulus packages totalling US$3 trillion over the past year to combat the pandemic, further straining public finances by adding to the debt pile that is the biggest among major industrialised nations.
Suga has repeatedly brushed aside the chance of compiling another stimulus package any time soon, arguing that the government still had money left over from a pool of reserves set aside to meet immediate funding needs to combat the pandemic.
With some lawmakers from within his own Liberal Democratic Party (LDP) calling for bigger spending, however, many analysts expect Suga to compile an extra budget to fund another stimulus package later this year.
The size and timing of the package will depend much on when Suga call a snap election, a decision complicated by low approval ratings for his handling of the pandemic and the Tokyo Olympic Games starting from July 23.
A lower house election must be held around the time the incumbent lawmakers' term end on October 21. Suga must also win a ruling party leadership election when his term ends on September 30. ― Reuters
