The Japan government approved a stimulus package worth $29 billion in its latest attempt to bring the economy back into track that slipped into recession in the third quarter.
The package focuses on providing subsidized heating fuel for poor households, supporting small firms with low cost funding and distributing purchase coupons to lift consumption. These measures are expected to boost the real gross domestic product by 0.7 percent.
Around JPY 1.7 trillion will be used to rebuild disaster-hit regions and to improve disaster preparedness.
In the third quarter, the economy slipped into recession after the sales tax hike forcing the government to delay its next tax increase and to call an early election in December. Following the election victory, Prime Minister Shinzo Abe said economic policies will retain priority.
Economic data released on Friday reignited fears of low inflation and weak economic activity in the world’s third largest economy.
Consumer price inflation, excluding fresh food, slowed to 2.7 percent in November, the lowest since March, from 2.9 percent in the previous month. Industrial production declined for the first time in three months in November.
The new stimulus package is part of an extra budget for the fiscal 2014, which is set to be approved by the Cabinet on January 9.
The government, which is tackling huge public debt, plans to fund this extra spending from the unspent money from prior budgets and tax revenue in the current fiscal year and avoid further debt issuance.
The Bank of Japan expanded its monetary easing programme in October as policymakers assessed it necessary to achieve the 2 percent inflation target.
The material has been provided by InstaForex Company – www.instaforex.com