Late on Friday, Japanese Prime Minister Shinzo Abe announced the government will inject some 475 billion yen, or about $490 billion, into the economy. The move came in a hastily-convened press conference after a report that the government’s internal investigation into suspicions of financial misconduct by some bureaucrats discovered that the sum had been illegally deployed into an account that is used by “politicians, public servants and their friends.”
At the news conference, Abe and Finance Minister Taro Aso pledged to recover the funds that had been improperly contributed from the country’s central bank reserve. In a statement, Abe said, “This is a valuable lesson for how deeply society must regard violating various laws and regulations.”
The 50 billion yen cut to the ¥515 trillion ($4.8 trillion) GDP target was not particularly consequential; it was a figure scheduled for the later end of the fiscal year, so it was simply suspended. The stimulus package, however, will be a welcome boost to a stalling economy.
Abe, who inherited much of Japan’s growth agenda from his mentor and long-time rival, Junichiro Koizumi, has some work to do to establish his own self-described “economic revival plan.” His government expects to see high-speed rail link between Tokyo and Osaka, hoping it will boost tourism and tourism infrastructure, as well as a high-speed domestic passenger train linking Osaka and Tokyo, which has never gone into service. The bullet train could expand employment by adding 17 million workers to the economy, according to government estimates.
But while past stimulus measures have driven down long-term government borrowing, this latest package actually increased government spending as a percentage of GDP by about 3 percentage points. Government bonds, on the other hand, are expected to see limited increases.
GDP figures released on Friday suggest that the economy slipped back into recession in the first quarter of 2018.