Japan readying a $120 billion stimulus package

On Tuesday, according to two government officials with direct knowledge of the matter at hand, Japan is preparing an economic stimulus package worth $120 billion to support its weak economic growth.

“The spending will be earmarked in a supplementary budget for this fiscal year to next March and an annual budget for the coming fiscal year from April. Both budgets will be compiled later this month”, said sources on the condition of anonymity since the package has not been finalized.

The financial package will come to around $120 billion (13 trillion yen) and will rise to $230 billion (25 trillion yen) once private-sector and other spending are clubbed.

The increased spending could add to Japan’s public debt burden, which tops more than twice the size of Japan’s $5 trillion economy.

Despite the headline size of the stimulus package, actual spending is likely to be much smaller in the current fiscal year; economists do not expect much of a boost to Japan’s economy in the current fiscal year.

“We expect this fiscal year’s extra budget to total around 3-4 trillion yen. We should not expect it to substantially push up the GDP growth rate,” said Takuya Hoshino, senior economist at Dai-ichi Life Research Institute.

Direct government spending is expected to touch 7-8 trillion yen, opine economists.

Sources of funding however remain unclear.

A final decision on the package could be made as early as this Thursday.

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