Japan unveils $ 120 b fiscal package to shore up growth

Japanese PM Shinzo Abe during his meeting with Danish PM Lars Loekke Rasmussen on July 10, 2017 in Copenhagen, Denmark 

TOKYO (Reuters): Japan unveiled a $120 billion (93.53 billion pounds) fiscal package on Thursday to support stalling growth in the world’s third-largest economy amid offshore risks and as policymakers look to sustain activity beyond the 2020 Tokyo Olympics investment spurt.

Prime Minister Shinzo Abe announced the 13 trillion yen ($119.66 billion) package on Thursday, the size of which had been reported previously. The government is expected to announce further details of the package later in the day after the cabinet has approved it.

“We managed to compile a strong policy package,” Abe told a gathering of ruling party lawmakers and government officials on Thursday.

“It’s based on three pillars of ensuring disaster rebuilding and safety, providing intensive support to overcome downside economic risks and sustaining economic vitality after the Tokyo Olympics,” he added.

The economic package amounts to 25 trillion yen ($230 billion) when government loans, credit guarantees and private-sector spending are included, sources have told Reuters this week. It also includes an extra budget from this fiscal year and spending earmarked for fiscal 2020.

Despite the headline size of the stimulus, economists see impact of the spending will be limited near-term, because actual spending is expected to be much smaller.

In compiling the package, Japan’s heavily indebted government will tap stretched fiscal space to combat overseas risks and the impact of a sales tax hike.