Japan's new Prime Minister has launched a ¥10 trillion (£72bn) stimulus package to create 600,000 jobs, boost growth by 2pc and shake off nearly two decades of stagnation.
Shinzo Abe, who came to power in a landslide election victory last month, said the measures demonstrated “a clear commitment to economic revitalisation” and rejected suggestions they signalled a return to the politics of the past when governments tried to bribe voters.
Successive Japanese governments have attempted to rekindle growth with stimulus programmes, but with little success.
However, economists warned that the plan might be an expensive gamble that would only deepen the country’s debt problems. Taro Saito, senior economist at NLI Research Institute, said the package could “have a negative impact on Japan’s fiscal health” if it failed “to ignite a sustained recovery”.
Japan, the world’s third-largest economy, has the highest debt ratio among developed nations — at 230pc of GDP.
However, Mr Abe insisted that this time the plan would work. “There is a suspicion that it is a kind of wasteful spending on white elephant projects that the [previous government] did in the past. That’s wrong,” he said. “Fiscal discipline is quite important. However, without a strong economy ... we cannot improve our fiscal health.”
Including private sector and local government commitments, the total package came to ¥20 trillion. Rebuilding disaster-struck areas, ensuring schools and hospitals are earthquake resistant and upgrading ageing infrastructure were among the planned measures. About ¥180bn will be spent on defence projects.