Japan’s Cabinet to Create a Supplementary Budget to Stimulate Economy

Prime Minister Shinzo Abe is likely to instruct Cabinet ministers concerned to compile a supplementary budget for fiscal 2014 containing pump-priming measures as early as mid-November to prop up the economy, government sources said.

The Japanese economy has been plagued by a prolonged downturn in consumer spending since the consumption tax was raised from 5 percent to 8 percent in April. Therefore the government sees the need to shore up the economy. The government is considering specific measures such as cash stipends for low-income earners and financial aid for business operators hit by rising fuel prices. Prime Minister Abe is to decide by the end of this year whether to raise the consumption tax to 10 percent from October 2015 as originally scheduled, but he is keen to draw public attention to his efforts to stimulate the economy beforehand.

The Finance Ministry, which attaches importance to fiscal soundness, wants to shore up the economy in such a way as to lay the ground for another hike in the consumption tax. But some officials close to Abe and in the ruling camp hold the view that the consumption tax hike should be postponed. Therefore, Prime Minister Abe is likely to decide carefully whether to raise the sales tax. If Abe were to decide to raise the tax, the government would consider setting aside such funds as “reserves for an economic stimulus package” in the budget for fiscal 2015 that could be used flexibly in times of economic stagnation.

via Mainichi

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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