Written by Håkan Dahlström, CNN
The government of Japan has approved a $490 billion stimulus package to boost its flagging economy after a host of factors, including last year’s earthquakes and the financial crisis, damaged growth.
The government’s Japan Economic Stimulus Package (JESP) includes significant reforms designed to increase the economy’s competitiveness and raise its productivity levels.
2.30 million households will benefit from the JESP
Between April and December 2017, 2.30 million households will benefit from this program, some 2.15 million households from a further loan consolidation and extending the tax relief for energy-saving homes from January 2018 to January 2020.
2.8 million households will receive energy-saving home loans by the end of the JESP’s second year.
The package also includes a ¥5 trillion ($48 billion) increase to this year’s fiscal stimulus package.
So far a review of the package has been conducted by the government and is due to be finalized in September, with the stimulus itself expected to begin being implemented in December.
JESP also aims to promote corporate investment and to encourage businesses to develop new, local industries.
“Japan’s economy failed to grow in the second quarter due to the quake-related destruction,” explains Neil Shearing, chief emerging markets economist for Capital Economics.
“There was also a sales tax hike in April and cuts in public expenditure.
“This latest package, however, looks like it will do more to give the economy a kick-start than any other.”
Tokyo Electric Power Co. (TEPCO) Logo Credit: TEPCO via Getty Images
Alongside the stimulus package there’s a controversial recent decree by the government to raise the legal retirement age for working-age people in Japan from 50 to 56, a policy that some contend is somewhat shortsighted and will limit Japan’s access to younger workers.
That decision will be subjected to a review later this year and may be adjusted, but it has not been taken lightly by the government and has created some unrest among those with a vested interest.
Additionally, U.S. President Donald Trump has threatened to impose new tariffs on Japanese cars, a prospect which is likely to ramp up opposition to the JESP’s bullish national economy.
The stimulus package has already been compared to President Barack Obama’s trillion-dollar stimulus package of 2009, which the New York Times argues might have done more harm than good in reducing unemployment, increasing government debt and impacting Japan’s ability to fund its social security system.
Analysts have argued in favor of the package in the time since news of it broke, and Japan’s stock market has rallied by nearly 10% since June.