Japan is expected to see another stimulus package under a new prime minister. As several candidates are running in the ruling party’s leadership race, they are pledging fresh spending measures. They aim to boost growth and cushion the blow to households from rising inflation.
More Fiscal Spending
While announcing his intention to run in the race to replace PM Fumio Kishida, Chief Cabinet Secretary Yoshimasa Hayashi declared his plans. He has said he would prefer boosting spending, rather than cutting taxes, if the economy requires another stimulus package.
Another candidate, Sanae Takaichi, also called for more fiscal spending to strengthen the economy.
“Strategic deployment of fiscal spending will increase jobs, household income, and improve consumer sentiment. It will also increase tax revenues without raising the tax rate and help build a strong economy,” Takaichi said on Monday, to announce her intention to run in the leadership election.
The remarks followed those by the leading candidate, Shinjiro Koizumi, on Friday. He said he would “immediately” work on a new economic package to aid small firms and low-income households hit by rising living costs.
“I’ll aim to beef up the underlying strength of the Japanese economy. I want to attain growth even in an era where inflation and higher interest rates co-exist,” Koizumi said.
The winner of the Liberal Democratic Party’s (LDP) leadership race, scheduled on Sept. 27, will become the next prime minister due to the party’s control of parliament.
Goodbye Kishida
Kishida announced last month that he would step down as LDP chief in September. This effectively ends a three-year term as leader of the world’s fourth-largest economy.
His successor is likely to dissolve parliament next month after being chosen as prime minister in an extraordinary parliament session. Analysts say they may call for a snap election.
Ruling party lawmakers traditionally make pledges of big spending packages to lure voters when elections near. This trend led to a ballooning public debt which, at twice the size of Japan’s economy, the biggest among advanced nations.
The candidates have offered few clues on their views on monetary policy. Hayashi has declined to comment, when asked about if Bank of Japan (BOJ) is likely to raise interest rates further.
Koizumi did not directly comment on monetary policy, but said he would “basically carry over” the economic policies of Kishida’s administration.
