The Japanese government has approved emergency stimulus spending of about ¥10.3 trillion – equivalent to around US$116bn – as part of prime minister Shinzo Abe’s initiative to boost Japan’s flat economic growth.
“We will put an end to this shrinking, and aim to build a stronger economy where earnings and incomes can grow,” Abe said in a news conference. “For that, the government must first take the initiative to create demand, and boost the entire economy.”
The funding will be focused on public works and disaster mitigation projects, subsidies for companies that invest in new technology and aid packages for small business. Abe said that the stimulus package, one of the largest spending plans in Japan’s history, aims to raise the country’s real economic growth by two percentage points and to create 600,000 new jobs.
Abe, who returned to power last month, also called on the Bank of Japan (BoJ) to emulate the US Federal Reserve by including jobs growth in its mandate, He also urged Japan’s central bank to intensify its commitment to beating deflation, which has been a feature of Japan’s economy for almost two decades, by pumping more money into the economy and encouraging Japanese businesses to invest and consumers to spend.
Reports suggest that the pressure from Abe will persuade the BoJ to double its inflation target to 2% at its 21-22 January rate review meeting and review a possible easing of monetary policy by increasing government debt and asset purchases.
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The central bank has tweaked its stimulus programme and is making a fresh effort to push Japan’s inflation rate above its 2% target.
Despite faster payment technologies, business-to-business payments by paper cheque show no sign of decline from three years ago.