Fumio Kishida, Japan’s prime minister, announced a record $490 billion stimulus package for the world’s third-largest economy on Friday, aiming to shore up the country’s patchy pandemic recovery.
The 56 trillion yen injection, the third since the COVID-19 crisis last year and expected to be approved by the cabinet later in the day, “is enough to give the Japanese people a sense of safety and hope,” Kishida said.
The spending will include a variety of measures, including cash and coupon handouts to low-income families with children under the age of 18, as well as pay raises for nurses and caregivers.
The massive spending plans come after Japan’s economy shrank far more than expected in the second quarter as leaders struggled to contain the outbreak in Tokyo and other cities.
Former Prime Ministers Yoshihide Suga and Shinzo Abe poured 40 trillion yen and 38 trillion yen into the economy in 2020, respectively, though some analysts and the media have questioned how effective that spending was.
“We were able to construct economic measures that will open the new society after the pandemic,” Kishida said during policy talks between the cabinet and the ruling coalition.
He predicted that fiscal spending would reach 79 trillion yen, including other components such as fund loans.
Kishida won a general election last month after promising to unleash a massive spending program after his predecessor Suga resigned, partly due to his government’s virus response.
Since the pandemic began, businesses, particularly restaurants and bars, have faced months of on-and-off restrictions on opening hours and alcohol sales. Tourists are also barred from entering Japan.
Japan’s economy shrank 0.8 percent in the three months to September, far worse than market expectations, according to government data released this week, as a record surge in virus cases impacted spending and supply-chain issues hampered business.
However, daily cases have dropped significantly in recent months, and more than three-quarters of the population is now fully vaccinated, with most restrictions lifted nationwide.
Economists predicted that the stimulus would help Japan’s economy to some extent, though some media outlets questioned the effectiveness of handouts and criticized a lack of clarity on how the spending would be paid for.
According to the International Monetary Fund, Japan already has a massive public debt load equal to 250 percent of its GDP.
According to Kengo Sakurada, chairman of the Japan Association of Corporate Executives, the government should explain why the stimulus package is “necessary and what effects are expected.”