Japan Plans To Spend 1 Trillion Yen on Public Works

Japan will spend around 1 trillion yen ($9.86 billion) on public works in a stimulus package to be finalized next month, sources said, to help offset the impact of an increase in the sales tax.

Prime Minister Shinzo Abe’s cabinet is expected to approve the stimulus package, which will total around 5 trillion yen, on December 5.

The government plans to raise the sales tax in April to 8 percent from 5 percent currently to pay for growing healthcare spending.

Abe wants to use short-term stimulus spending to counter the blow to consumer spending from the tax hike.

The package is likely to contain around 200 billion yen for a temporary expansion of payments to families with children, sources with direct knowledge of the matter said.

The package will also spend about 300 billion yen on payouts to low-income earners and around 150 billion yen on subsidies for new home purchases, sources said.

Japan’s government has previously said that it will fund the stimulus package with budget reserves and higher-than-expected tax revenue so it does not have to issue new bonds.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza