Japan's Economic Package to Reach 73 Billion Dollars: Report
Reviewed by Takahiro MIYAO
Global Japan's Economic Package to Reach 73 Billion Dollars: Report
It is reported in the AFP article linked above that the Japanese government is to announce an economic package to stimulate the economy by the end of this week, as Japan's economy registered a negative GDP growth rate for the second quarter this year. The stimulus package this time is said to be worth about 73 billion dollars, relatively small compared to previous economic packages due to fiscal constraints in today's Japan. Actually, the size of the package seems to be a major political issue within the government and the ruling coalition, reflecting the absence of consensus regarding the government's fiscal reform.
The real issue is not the size of the stimulus package, but rather the effect, or the lack of it, of fiscal policy itself. Come to think of it, the main cause of the current economic downturn in the Japanese economy as well as in the global economy is financial rather than fiscal in nature. Globally, the subprime loan problem is the source of economic slowdown, and domestically sharply curtailed bank loans for real estate have caused serious problems in housing and other real estate markets, spreading into other fields in Japan. Therefore, more attention should be paid to financial measures than fiscal measures in the current economic stimulus package.
One thing that the government can do is give strong guidance to financial institutions for lending more money to real estate companies, especially small and medium sized ones, as well as retail and other consumer-related businesses. This is exactly what the Financial Services Agency should do at this point, and will be more effective than any fiscal measure to avoid further downward movements in the Japanese economy.
This review is adopted from the following blog (with its Japanese translation):