After assuming as Prime Minister of Japan, Sanae Takaichi is preparing an economic stimulus package to help households cope with inflation. The amount is expected to exceed last year’s US$92 billion and it is its first initiative in the matter.
The package of more than 13.9 trillion yen (US$92.19 billion) marks the Takaichi’s first major economic initiative since her inauguration on Tuesday, under the commitment to what she calls “responsible proactive fiscal policy.”
The measure has three main pillars, as detailed by anonymous sources to Reuters:
- Measures to counter inflation;
- Investment in growing industries;
- National security
The Japanese prime minister is preparing a big stimulus to tackle inflation, according to sources
The Japanese stock index Nikkei erased losses and rose on Wednesday afternoon following this Reuters report, while the yen pared its morning gains and was little changed.
As part of its measures to alleviate underlying inflation, the management of Takaichi plans quickly abolish the provisional gasoline tax and expand local government subsidies, with support for small and medium-sized businesses that are left out of current tax incentives for wage increases.
The package will also include investments in growing sectors such as artificial intelligence and semiconductors, while focusing on strategic economic development.
Although the plan already has these clear points, the sources indicated that the exact amount of the package is still being finalized and which could be announced next month.
To finance the measures, a supplementary budget for the current financial year until March, with a view to approving it during the next extraordinary session of Parliament.
If additional spending exceeds initial expectations, the government may have to issue bonds to cover the shortfall, raising questions about how to balance economic growth with fiscal discipline.
Sanae Takaichi becomes the first woman to govern Japan and the market expects a strengthening of the yen
Sanae Takaichia hardline conservative, was elected on Tuesday as the first woman to lead Japan’s government, breaking the political glass ceiling and preparing the country for a decisive shift to the right.
Satsuki Katayama was named Japan’s next finance minister, giving markets reason to pause before putting too much pressure on the yen, which could also help new Prime Minister Takaichi find new ways to finance bold economic stimulus plans, analysts said.
In an interview with Reuters in March, Katayama said Japan’s economic fundamentals suggest the real value of the yen is closer to 120-130 per dollar. These comments were made when the yen had fallen to around 150 against the dollar on market expectations that the Bank of Japan (BoJ) would act slowly in monetary adjustment.
Source: Ambito
