Shinzo Abe (right) and Toshimitsu Motegi during a parliament session in Tokyo. Agence France-Presse
Japan’s ruling coalition lawmakers have called for an additional budget that would include $92 billion in spending to support slowing growth, party officials said on Thursday, raising worries about straining public finances.
The government wants to craft a strong fiscal package, taking into account of the economic situation, global economy and damage caused by typhoons, which were larger than last year, so as to get the economy on a solid growth path.
Japan’s Prime Minister Shinzo Abe spoke to Foreign Minister Toshimitsu Motegi during a House of Councilors plenary session at Parliament in Tokyo on Wednesday. Shinzo Abe became Japan’s longest-serving premier with shrewd diplomacy, unwavering nationalism and a knack for surviving scandal.
The agreement, made in a meeting between senior officials of Japan’s ruling coalition on Wednesday, highlights the concern among lawmakers about the economic outlook thanks to a sales tax hike in October and slowing global demand.
“Prime minister told us to compile a sizable package to take all possible steps on the economy,” Economy Minister Yasutoshi Nishimura told a news conference.
However, analysts have doubts about Abe’s ability to spend such a large amount given Japan’s government debt, which is twice the size of its $5 trillion economy and the industrial world’s heaviest public debt burden.
Additionally, major infrastructure spending programmes could still face serious execution risks given the country’s tightest labour market in decades amid a rapidly ageing population.
“Even if the government secured a budget for big public works, it would be difficult to implement it smoothly,” said Kiichi Murashima, economist at Citigroup Global Markets Japan.
“Chances are low for the government to compile a supplementary budget worth 10 trillion yen ($92.19 billion). We expect the size of this fiscal year’s extra budget to fall short of 5 trillion yen.”
The government will compile a supplementary budget for the current fiscal year ending March 2020, as well as next fiscal year’s budget plan in December, allowing funds to be disbursed over a 15-month period, sources said.
Both budget drafts need parliamentary approval to take effect. Supplementary budgets of more than 10 trillion yen have only been compiled four times in the past, including after Japan’s devastating earthquake and tsunami in 2011.
The ruling bloc’s requests focus on spending for disaster relief from a string of typhoons that struck Japan earlier this year and funding to help farmers cope with fallout from a US-Japan trade deal that opens some markets to U.S. goods.
Earlier this month, Abe ordered his cabinet to compile a package of stimulus measures to cope with external risks and large natural disasters, and support the economy after the 2020 Tokyo Olympics.
“We need a huge supplementary budget sized at least around 10 trillion yen,” Abe’s Liberal Democratic Party’s (LDP) heavyweight Toshihiro Nikai told reporters earlier this week.
Meanwhile, Japanese stocks tumbled on Thursday on concerns that a US-China “phase one” trade agreement will be delayed, but losses were pared after China’s top negotiator reportedly expressed optimism that a deal can still be reached.
The Nikkei share average fell 0.5% to 23,038.58 points, its lowest close since Nov. 1, after a choppy session.
Analysts said profit-taking set in after the benchmark fell below both the psychological 23,000 level and the key 25-day moving average, which last stood at 23,016.
In early trade, the benchmark slid as much as 1.8% to 22,726.72, a three-week low, on concerns a preliminary trade deal between Washington and Beijing may not be completed this year.
Adding to the tensions between the world’s two biggest economies, the US House of Representatives on Wednesday passed legislation intended to support protesters in Hong Kong and send a warning to China about human rights.
Bloomberg News reported on Thursday that China’s Vice Premier Liu He said he was “cautiously optimistic” on a phase one deal. Liu reportedly made the comment in a dinner speech in Beijing on Wednesday, citing people who attended the event ahead of a forum organised by Bloomberg. Recent gainers, most notably semiconductor-related stocks, were on the retreat. Tokyo Electron dropped 3.4%, Advantest Corporation slid 3.9% and Screen Holdings dived 4.4%.
Nikkei heavyweight SoftBank Group fell 1.6% after media reported the tech conglomerate is in talks for a loan of about 300 billion yen ($2.8 billion) from Japanese banks, led by Mizuho Financial Group. Mizuho’s shares ended flat.