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Japan okays $130-bn fiscal steps as BOJ denies curbing stimulus
TOKYO: Japanese Prime Minister Shinzo Abe’s Cabinet approved 13.5 trillion yen ($132 billion) in fiscal measures on Tuesday even as the central bank fought market
TOKYO: Japanese Prime Minister Shinzo Abe’s Cabinet approved 13.5 trillion yen ($132 billion) in fiscal measures on Tuesday even as the central bank fought market speculation that it is preparing to put the brakes on monetary stimulus for the world’s third-biggest economy.
The government’s package includes 7.5 trillion yen in spending by the national and local governments, and earmarks 6 trillion yen from the fiscal investment and loan programme, which is not included in the government’s general budget.
But even before the announcement, Japanese government bonds saw their worst sell-off in more than three years as investors feared the Bank of Japan may ratchet back the pace of its aggressive government bond buying.
The BOJ disappointed markets on Friday by keeping bond purchases steady, and made traders even more nervous after announcing it would re-evaluate policies in September.
Governor Haruhiko Kuroda declined to comment on the spike in JGB yields but said the planned review will not lead the BOJ to weaken its stimulus. “I don’t think that would happen,” Kuroda told reporters, when asked whether the promised “comprehensive review” might lead to reduced BOJ stimulus.
On Tuesday morning, Japanese prime Minister Shinzo Abe said: “We compiled today a strong economic package draft aimed at carrying out investment for the future. With this package, we’ll proceed to not just stimulate demand but also achieve sustainable economic growth led by private demand.”
Abe last month ordered his government to craft a stimulus plan to revive an economy dogged by weak consumption, despite three years of his “Abenomics” mix of extremely accommodative monetary policy, flexible spending and structural reform promises.
