Japan's $265 Billion stimulus plan

[sox63]

Japan's prime minister unveiled a surprisingly large $265 billion stimulus package on Wednesday to reflate the world's third-largest economy, adding pressure on the central bank to match the measures with monetary stimulus later this week.

The earlier-than-expected announcement to boost the flagging economy sent Japanese and other Asian stock markets higher while it weighed on the safe-haven yen, but lacked crucial details on how much of the package would be direct government spending.

The size of the package, at more than 28 trillion yen ($265.30 billion), exceeds initial estimates of around 20 trillion yen and is nearly 6 percent the size of Japan's economy. It will consist of 13 trillion yen in "fiscal measures," which likely includes spending by national and local governments, as well as loan program.

Given our specific challenges on pumping life into our economy, it's interesting to see what the bigger economies are doing. IMO, they all seem to believe in throwing more money at the problem. In the SA context, we obviously can't afford to throw money at the problem as our challenges are mostly structural, however in an ideal world, even if we were to implement wide reforms in labour policy for example and make it more flexible, it essentially means the same thing as the bigger economies, more money floating around.

Would that money be spent though or just pocketed by companies?

NO LASTING IMPACT?

Abe ordered his government earlier this month to craft a stimulus plan to revive an economy dogged by weak consumption, despite three years of his "Abenomics" mix of hyper-easy monetary policy, big spending and structural reforms.

As part of the package, the government said it would raise the minimum wage by 3 percent this fiscal year to ramp up consumer spending.

Sources told Reuters the package would have a headline figure of at least 20 trillion yen. Only about 9 trillion yen was to come from a combination of direct spending from both national and local governments and loan programs.

Such "fiscal spending" appeared to have increased to 13 trillion yen. But the rest is likely to come from state subsidies to private firms and lending from quasi-government entities, which does not involve direct government spending and thus may not give an immediate boost to growth, analysts say.

Abe's administration has also offered few hints on how it will finance the package, casting doubts on Japan's ability to fix its tattered finances.

Are these measures effective at all is the bigger question.

http://www.reuters.com/article/us-japan-economy-abe-stimulus-idUSKCN1070AE

 

[netstrider]

I just don't see how it will fix this issue.

"The Japanese public debt exceeded one quadrillion yen (US$10.46 trillion) in 2013, more than twice the annual gross domestic product of Japan."

 

[NarrowBandFtw]

Abenomics: you can always make your losses back from the casino by doubling down!

 

[sox63]

I just don't see how it will fix this issue.

"The Japanese public debt exceeded one quadrillion yen (US$10.46 trillion) in 2013, more than twice the annual gross domestic product of Japan."

They seem to think the money will filter down to people and the economy picks up. In theory that's fine, however in practice I as a CEO would probably sit on the cash and not pass it on just yet. Hence the jump in equities after the announcement