Economic Stimulus Plan Approved

Shigeru Ishiba Cabinet approved an economic stimulus plan, which marked the first policy package since its establishment in early October. The plan accumulated 13.9 trillion yen for the general account in national budget, which will be submitted to extraordinary session of the Diet scheduled to be convoked later this month. The spendings of national government, including special account and financial investment and loan, will expand to 21.9 trillion yen. Total amount for all projects will be about 39 trillion yen with spendings of private sectors. Ishiba accelerates his measures for supporting households to raise public approval for his Cabinet.

The stimulus plan consists of three pillars: growth of national and local economy in Japan, overcoming price inflation, and preserving security and safety of the nationals. 5.8 trillion yen out of 13.9 trillion yen in the general account will be appropriated to economic growth, 3.4 trillion yen will go to overcoming inflation, and 4.8 trillion yen will be spent for security and safety of the people.

 

30 thousand yen will be distributed each family which annual income is as low as exempted from payment of residential tax. 20 thousand yen will be added to a family with little child. Although the government has planned to terminate the allowance to reduce payment for electricity and gas, Ishiba administration decided to extend the expiration by March. Support for gasoline will also be continued.

 

The measures for economic growth are focused on sustainable and structural rise of workers’ wage. National average of minimum wage, currently around 1 thousand yen per hour, is hopefully going to be 1.5 thousand yen by the end of 2020s. The government is going to invest more than 10 trillion yen for artificial intelligence and businesses related to semiconductor by 2030.

 

Spendings for security and safety included recovery and reconstruction of the region devastated by the earthquake in Noto Peninsula on the new years’ day of this year. The government also accelerate deployment of air-conditioning devices to school gyms, which would be used as shelters in emergency. The police will enhance counter measures against robberies which takes advantage of social networking services for communication among gangs.

 

The biggest question is whether the budget will pass the Diet. Ishiba administration embraced removal of “Wall of 1.03 million yen” of annual income to attract Democratic Party for the People (DPP), which approval is indispensable for passing the budget bill. It is described in the stimulus plan that the threshold would be raised through discussion over tax reform for FY 2025.

 

DPP demands that the threshold will be raised to 1.78 million yen, which causes 7 to 8 trillion of shortage in tax income. 4 trillion out of that would be income of residential tax, and 1 trillion yen causes reduction of allowance to local governments. Prefectural governors are against the idea of raising the threshold and there appears an argument that residential tax should be excluded from the discussion of Wall of 1.03 million yen.

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