Tokyo: Japanese Prime Minister Shinzo Abe on Friday ordered the compilation of an extra budget for the current fiscal year, in a bid to spur growth in an economy that has contracted in the past two quarters.
The budget, which Abe adviser Etsuro Honda has said should be as much as 3.5 trillion yen ($29 billion), will provide financial aid to low-income pensioners. About 10 million of the nation’s 40 million pension recipients would each receive about 30,000 yen under the plan, the Asahi newspaper reported, citing unidentified government officials.
“The prime minister ordered temporary assistance for poor pensioners to guard against downside risks to the economy,” Finance Minister Taro Aso told reporters in Tokyo. ‘We haven’t decided on the amount or details. It’s true this is being discussed to deal with income inequality.”
The supplementary budget may help spur growth in the first three months of 2016. Japan has had extra budgets to stimulate the economy in each year since at least 2012, when the main budget was augmented by an extra 3.1 trillion yen.
Data released Friday showed household spending in October fell for the second straight month, and the Bank of Japan’s key inflation gauge continuing to hover near zero. A bright spot in the world’s third-largest economy was the jobless rate, which dropped to 3.1 per cent, its lowest level since 1995.
“The labour market is quite tight, so the situation is improving for households with working people,” said Masamichi Adachi, an economist at JPMorgan Chase & Co. and a former central bank official. “It’s the pensioners who are suffering as the food prices are going up on the back of the yen’s depreciation.”
The budget also will focus on measures to implement an Asia-Pacific trade pact, disaster preparation and the government’s new plan to stabilise the population at 100 million. Yoshihide Suga, the administration’s top spokesman, said Japan will honour its goal of reducing the deficit when compiling the budget.
Abe is trying to put the budget balance into surplus, excluding interest on debt, by the fiscal year starting in April 2020, which is unlikely even under the most optimistic Cabinet Office scenario.
‘Mission Impossible’
Abe this week outlined measures for his “Abenomics 2.0” platform in a bid to reach targets such as a 600-trillion-yen economy by 2020 and an increase of the birth rate to 1.8 from 1.4 children per woman now.
He said his government would aim for a 3 per cent rise in the minimum wage and pledged to quickly move to cut the corporate-income tax to less than 30 per cent. On the demographics front, Abe laid out plans to support fertility treatment, cut waiting lists for day care and build more homes for three-generation families.
While more comprehensive plans will be unveiled next year, Adachi wrote in an emailed note that the measures are insufficient to meet Abe’s targets.
“Abe’s administration is supporting the economy and equity prices are a key barometer of its achievement, but we do not expect much on the genuine reforms that would pave a way to achieve the Mission Impossible,” he said.
