By Stocksak: Japan’s stimulus program must exceed $100 billion

© Stocksak. FILE PHOTO – This illustration picture shows a banknote made of Japanese yen. It was taken June 15, 2022. REUTERS/Florence Lo/Illustration/File photo

TOKYO (Stocksak), Sunday, a senior ruling party official stated that Japan’s promised economic stimulus must be large enough to surpass the economy’s output gap at about 15 trillion yen ($100billion).

“The gap in Japan’s Gross Domestic Product (GDP), now stands at 15 trillion yen. It is not enough to fill this gap,” Yoshitaka Shindo (executive acting chairperson of LDP’s policy research council) stated.

Shindo stated that both quality and size are important in the package. It was designed by Prime Minister Fumio Kirishima’s administration to offset rising fuel and raw materials prices.

Last week, Shindo spoke on NHK’s public broadcaster NHK about the LDP’s proposal to Kishida.

These remarks are part of a growing demand from the ruling party for substantial spending to alleviate the pressure on households from rising inflation.

Shindo stated that although the Bank of Japan should eventually abandon ultra-easy policies, it is premature to do so now as Japan’s economy continues to be weak.

Shindo stated that “no country uses monetary policies to manipulate currency rates.” Shindo dismissed the notion that the BOJ should raise interest rate to moderate the sharp drop in the yen to its 32-year lows.

Japan intervened on Friday in the foreign currency market to purchase yen for the second consecutive month. This was partly due to the widening gap in interest rates between the U.S.A and Japan.

“It is important to maintain price stability. This can only be achieved if we have higher wages.

The government is expected announce the stimulus package by end of the month. This is because the weak yen increases households’ pain by driving up the cost of food and fuel.

Kyodo news agency reported Friday that the government and LDP led coalition are considering state expenditures of more than 20 trillion Japanese yen ($140 billion), to fund the package.

Kyodo stated that the package could be expanded beyond that amount by spending by local governments. A significant portion of the package will be financed through debt issuance.

($1 = 147.6400 yen)

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