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The Japanese Prime Minister Announces Package to Boost Economy

An announcement by Japanese Prime Minister Shinzo Abe revealed a massive fiscal spending package that is designed to boost the national economy.
Abe revealed that the package will be worth around 13 trillion yen, which is about £90 billion. This amount is to include an additional budget for this financial year, as well as extra spending that is set aside for 2020.  
According to reports, the overall amount will be even higher when the likes of private sector spending is added in. This could take it up to 25 million yen (£175 billion). 

What Does It Cover?
The Prime Minister of the Asian country said that the funds are being put in place to cover a range of different uses. They include disaster relief aid and economic risk preparation. It will also be used to smooth the way after the 2020 Tokyo Olympics have ended.
The breakdown has been given in the following terms. 7 trillion yen (£49 billion) for restoring infrastructure damaged by natural disasters. 7.3 trillion yen (£51 billion) for handling the downside risk of the economy. 11.7 trillion yen (£82 billion) to avoid a fall in public spending after the Olympics.  
The real reason being stated for this boost to economy is the risk of economic stagnation. Japan is one of several countries with negative interest rates. Their domestic economy has been slowing down during the recent global sluggishness, while a tax increase could hinder consumer spending in the near future.  
It is also believed to be an attempt to boost consumer activity, by promoting cashless payments. In addition, they will be spending money on public works that are designed to enhance the country’s infrastructure. 

What Happens Next?
At the time of writing, the Cabinet had just approved this economic stimulus. It is the first time in the last three years that Japan has turned to a package of this sort.  The last time, the amount pumped into the economy was higher, with 28.1 trillion yen in 2016. 
According to Abe’s comments in a meeting with senior officials, this is a “powerful policy package”. He also said that it is to help “overcome economic downside risks”. Among the factors that have damaged the economy is the trade war between the US and China, while Japan has also become involved in its own dispute with South Korea.  
One of the big risks in this country is that personal spending continues to fall. The recent tax increase could result in a sharp fall in Japan’s GDP, and it is feared that the economy will shrink by 2.7% in this quarter. 
The tax hike in October brought consumption tax up from 8% to 10%. A rise in factors such as international debt recovery has also been seen, as companies become more nervous about getting their loans repaid in the slowing global economy. 
The fiscal budget for 2020 is expected to be drafted in the next month. As this is the third biggest economy on the planet, many observers will be looking on with interest at how the country reacts to this boost to the economy.