Japanese to compile package of stimulus measures for economy

Japanese Prime Minister Shinzo Abe on Friday asked his cabinet to compile a package of stimulus measures to support the economy and build infrastructure to cope with large natural disasters, the government’s top spokesman said.

Chief Cabinet Secretary Yoshihide Suga told reporters that the package will include steps to promote investment for growth through aggressive use of fiscal investment and loan programmes.

The government will compile the package as soon as possible, though the size of spending will depend on proposals to be made by various ministries, Economy Minister Yasutoshi Nishimura told a news conference after a regular cabinet meeting.

“I’ve received an instruction from the prime minister to compile a new economic package to guard against the chance overseas risks may hurt Japan’s economy,” Nishimura said.

Japanese policymakers have been under pressure to fend off heightening overseas risks with a diminishing tool-kit, as the US-China trade war and soft global demand hurt the export-reliant economy.

Finance Minister Taro Aso said the planned economic package should help enhance productivity and achieve strong growth to overcome the pressure caused by the declining population, which he said was the “biggest problem” Japan faces in the long run.

Aso added that the size and scope of the stimulus still needed to be worked out. He suggested that a supplementary budget would be compiled by the year-end, along with an annual budget for the next fiscal year that starts in April 2020, to ensure the economic package would be rolled out seamlessly over a 15-month period.

Abe had told a top economic council on Thursday that the government will consider what policy measures it can take to prevent intensifying global risks from derailing the export-reliant economic recovery.

Japan’s economic growth likely slowed to an annualised 0.8% in July-September from 1.3% in the second quarter, a Reuters poll showed this week. The data will be reported on Nov.14.

An increase in the sales tax to 10% from 8%, put in place from October, may also hurt consumption, analysts say.

Slowing growth underscores the challenge for Abe’s government as it tries to strike a delicate balance between the need to boost growth and fix the industrial world’s heaviest public debt burden that is more than twice the size of Japan’s $5 trillion economy.

Some economists worry that additional public works spending would further strain the nation’s dire public finances and aggravate a labour crunch in a fast-ageing population.

Three quarters of Japanese companies have been hurt by a string of natural disasters over the past two years, suffering damage to factories, office buildings, distribution networks and supply chains, a Reuters survey found.

Most of those companies suffered direct or indirect effects that lasted more than a week while the impact lasted more than a month for a third respondents. Most firms in the Reuters Corporate Survey said they want the government of Prime Minister Shinzo Abe to spend more on steps such as strengthening levees and repairing aged infrastructure.

Last month, Typhoon Hagibis caused 71 rivers to burst 140 levees over vast areas in eastern Japan, following massive floods and power outages from Typhoon Faxai in September. A year ago, Typhoon Jebi battered western Japan, killing at least 13 people and snarling operations at the area’s biggest international airport. In July of last year, parts of western Japan were deluged with torrential rain, causing levees to break and landslides to destroy houses, killing over 200 people in Japan’s deadliest weather disaster in 36 years.

The scars of the powerful storms, as well as occasional earthquakes, have brought home to corporate Japan the importance of infrastructure spending and diversifying logistics and supply chains.

A Panasonic Corporation factory in northern Japan, inundated by Hagibis, will take about two months to repair, although it was too early to comment on the impact on the electronics giant’s profits, Chief Financial Officer Hirokazu Umeda told a news conference last week.

East Japan Railway Co will have to scrap eight of its roughly 30 Shinkansen “bullet trains” on its Hokuriku line that were flooded in a depot by Hagibis, at a cost of about $100 million, a spokesman said. Nippon Steel Corp last week slashed its annual forecast for consolidated business profit by one-third to some $900 million, citing such factors as suspended operations due to Faxai.

Reuters