Prime Minister Shinzo Abe has unveiled Japan’s largest fiscal stimulus initiative, a package worth ¥13.2 trillion ($212 billion) to stall the weakening global economy, particularly in light of a tax on household spending and the expected slowdown after the Tokyo Olympics next summer.
The financial package is roughly 1.9 percent of Japan’s GDP over a 15-month period, dwarfing last year’s supplementary ¥3 trillion budget.
Similar to other nations’ fiscal stimulus efforts, such as ultra-low interest rates, Japan is bending toward programs that cater to private interests.
James Malcom, a strategist of foreign exchange at UBS in London, said, “We are scratching our heads to figure out how much is new spending and what is different from 2016… we are still talking about big numbers in an economy where potential growth is limited. I would look at this in the relatively optimistic light of Japan being able to get things done.”
TREND FORECAST: As we have continually noted in the Trends Journal, the ten-year monetary methadone stimulus that has artificially pumped up equity markets and economics worldwide, has limited power to stop the oncoming “Greatest Depression.”
Therefore, nations – as evidenced with Japan, deep in debt with a 238 percent debt-to-GDP ratio – will sink deeper in debt with fiscal stimulus programs to prop up failing economies.
At best, the policy of promoting fiscal stimulus, which the International Monetary Fund is championing, will only temporarily boost nations’ economic growth and will prove to be a costly failure.
