The Japanese government is on the verge of adopting a recovery plan equivalent to 136 billion euros on Friday to boost consumers' purchasing power and stimulate sluggish growth, less than a month after a bitter electoral failure of the coalition in power.
This 22,000 billion yen plan will be formally approved at the end of the day by the executive, announced government spokesperson Yoshimasa Hayashi. It will then have to receive the green light from Parliament, where the government no longer has a majority.
The planned package includes subsidies for energy and fuel, aid packages of up to 30,000 yen (186 euros) for low-income households, as well as tax adjustments, according to local media.
The overall impact could reach 39 trillion yen if private sector loans and investments are added, Hayashi said.
Everything will be financed with a lot of additional public spending – some 13.9 trillion yen according to the spokesperson -, which will require a revised budget to be voted on by the end of December in Parliament.
“Our objective is to move away from an economy subject to cost reductions, and to move to an economy of added value creation,” Yoshimasa Hayashi told the press.
-Anger against inflation-
Prime Minister Shigeru Ishiba promised after his appointment in early October to support low-income households and those raising children, to revitalize rural regions, and to relax the rules on working hours.
However, he suffered a heavy failure in the early legislative elections at the end of October: his party, the Liberal Democratic Party (PLD, conservative) and its small ally Komeito failed to retain the absolute majority in the lower house of Parliament.
Discontent with the rise in consumer prices, which has persisted in the archipelago for around two and a half years after decades of almost non-existent inflation, weighed heavily in the vote.
And GDP growth in the world's fourth largest economy continues to run out of steam (only 0.2% year-on-year in the third quarter).
Needing the support of part of the opposition to adopt its recovery plan in Parliament, the Ishiba government included measures demanded by the People's Democratic Party (PDP, center) – notably an increase in the ceiling of taxable income.
According to the opposition party, this measure will encourage part-time employees, particularly young people and students, to work more to earn more, thereby limiting labor shortages and encouraging consumption.
But its detractors fear that this system will reduce tax revenues by several trillion yen, while Japan's debt ratio (more than 200% of gross domestic product) is already one of the highest in the world, and that the aging of its population increases the pressure on public finances.
The Japanese central bank also began this year to raise its key rates, which had long remained almost zero: this will make the mountain of debt increasingly costly for the State, observes Yoshimasa Maruyama, economist at SMBC Nikko Securities.
Tax cuts “must be accompanied by a permanent source of revenue,” insists Mr. Maruyama.
-AI Support-
In the immediate future, this plan arouses mixed reactions in the streets of Tokyo: “Today, not only low-income households but also middle-income families need more support measures”, regretted to AFP Hisaki Sato, a 46-year-old man.
Katsuhiro Hirakawa, a 63-year-old Tokyo resident, said the government should “think carefully about why it needs more tax revenue, or how it can reduce unnecessary spending, before making decisions on the budget.”
Economists fear that pressure from opposition parties will force the minority government to grant generous aid to households and businesses without providing equivalent tax revenue… without tackling structural problems to make the country more competitive.
The government is also preparing a separate plan of 10,000 billion yen (61 billion euros) in public funds by 2030 to support the growth of artificial intelligence and the production of semiconductors in the archipelago.
According to media reports, the government plans to take a stake of 200 billion yen in the Japanese firm Rapidus, specializing in new generation chips.
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