By Yoshifumi Takemoto and Daniel Leussink
TOKYO (Reuters) – Japan is considering an economic stimulus package worth more than 30 trillion yen ($265 billion) aimed at easing the pain from the COVID-19 pandemic, a plan that would require issuing new debt, Kyodo news reported.
Part of the spending will come from funds carried over from last year’s budget, Kyodo reported late on Sunday.
A government panel tasked with drawing up a blueprint for Prime Minister Fumio Kishida’s so-called new style of capitalism is expected to issue proposals on Monday that will lay the backbone of the planned stimulus package.
The world’s third-largest economy has emerged from last year’s initial hit from the coronavirus pandemic thanks to robust global demand, but faces ongoing risks from soaring raw material prices and global supply shortages.
Kishida has promised to compile a large-scale stimulus package this month, and the government is aiming for it to be passed by parliament by the end of this year. Kishida has, however, stopped short of specifying the exact size of the spending and the amount of additional debt.
The Japanese ruling coalition’s junior partner, Komeito, petitioned Kishida’s government on Monday to take steps to support the economy such as by giving out cash payments of 100,000 yen per child, which would cost about 2 trillion yen in total.
“There can’t be discrimination between those receiving it and those who don’t. Children are equal,” Komeito policy chief Yuzuru Takeuchi told reporters after handing in the plan at the prime minister’s office.
Komeito’s proposal also called on the government to give citizens 30,000 yen worth of consumption points for which individuals would qualify as long as they have a “My number card” for personal identification.
Some analysts questioned if that proposal would be effective.
If the government were to move ahead with the proposed cash handouts for all children, some households may simply decide to add to their savings instead of spending the money, said Takeshi Minami, chief economist at Norinchukin Research Institute.
“It’s unlikely to have a big impact on the economy over the short term,” Minami warned.
The government was likely seeking to include other measures in the stimulus package aimed at supporting consumption, especially in the heavy-hit service-sector, which some analysts are hoping will underpin the economy in the coming months.
Among items expected to be included in the package were a restart of a domestic tourism promotion campaign and steps to realise a 10 trillion yen fund for university research, the Sankei newspaper reported on Friday.
To pay for the package, the government was likely to use about 4.5 trillion yen left over from the settling of accounts of fiscal 2020 and more than 10 trillion yen in other unspent funds carried over from that fiscal year, and would consider issuing new debt to cover any further shortfalls, Sankei said.
The government plans to roll out the extra budget for this fiscal year together with the ordinary budget for next fiscal year starting in April 2022 as a combined 15-month budget as it seeks to fund its efforts seamlessly, the newspaper said.
($1 = 113.3500 yen)
(Reporting by Yoshifumi Takemoto, Daniel Leussink and Chang-Ran Kim; Editing by Gerry Doyle and Muralikumar Anantharaman)