Japanese Prime Minister Suga announces plans for a new stimulus package to alleviate pandemic pain

TOKYO, Oct. 28 (Reuters) – Japanese Prime Minister Yoshihide Suga will announce a new stimulus plan next week to help the recession-hit economy shake off the coronavirus crisis, four government and al-party sources said. government with direct knowledge of the matter.

Although the size of the package has not yet been decided, some ruling party lawmakers have already asked for one of around 10 trillion yen ($ 95.51 billion) to cushion the blow from the pandemic.

The bulk of the package will consist of about 7 trillion yen left over from a 10 trillion yen pool set aside to meet emergency needs to fight the pandemic, the sources told Reuters. The rest will consist of new expenses, they added.

The total package size is likely to be less than the combined $ 2.2 trillion launched in two previous stimulus packages this year, they said.

“It’s best to avoid making Japan’s fiscal cliff even steeper” by increasing spending too much in the short term, one of the sources said.

The package is likely to include extensions to existing programs that offer subsidies to help companies retain jobs and address funding difficulties, the sources said.

The government is also expected to extend a campaign offering discounts on domestic travel last January to save the country’s tourism industry, the sources said.

A third extra budget will be compiled around mid-December to fund part of the package, they added.

After experiencing its worst postwar contraction in the second quarter, the Japanese economy is expected to recover in the three months to September.

But the recovery has been piecemeal and fragile, as continued weakness in consumption and capital spending offset a rebound in exports and production, keeping policymakers under pressure to complement fiscal and monetary support.

Analysts, however, say the expected new stimulus package will only have a limited effect in boosting growth.

“The package size shouldn’t be that big,” said Takeshi Minami, chief economist at the Norinchukin Research Institute. “This means that the measures will likely focus on laying a foundation for growth, rather than stimulating the economy.”