Japan has finally bowed to the intensifying pressure of recent weeks and announced that it will deploy a stimulus injection to the tune of 750 billion yen.
After continual delays the decision could no longer be avoided after consumer prices slid for a fifth consecutive month and the Yen sunk to a sixteen-week low.
Consumer prices excluding fresh food dropped by 0.1 per cent from a year earlier and it is now widely predicted that the Bank of Japan will miss its 1 per cent inflation target for the next two fiscal years.
During an announcement made by the Japanese government in Tokyo today it was disclosed that discretionary budget funds will have to be tapped in order to raise the full amount of funding required.
Without offering specifics like a timeline, Japan’s economy minister Seiji Maehara informed reporters that the measures would improve the nation’s Gross Domestic Product by 0.1 percentage points. He then went on to assert that the government had yet to decide on how to finance the other fiscal measures scheduled to be drawn up in November. He gave no hint as to the possible size of those measures.
A chief economist with Itochu Corp stated: ‘Japan needs bigger stimulus as the economy is slowing faster than expected, but it will be hard to have larger spending due to political gridlock and worsening fiscal conditions. Political pressure will build on the Bank of Japan.’
Despite Finance Minister Koriki Jojima declaring that the government will run out of money by the end of next month if a bill allowing it to borrow 38.3 trillion yen is not passed opposition lawmakers in Japan are continuing to block it.
As Soichi Okuda, chief economist with the Shoiki Research Institute explained: ‘The risk of a Japanese fiscal cliff is quite big. Without the passage of the bill, the government can’t pay for necessary spending and the implementation of the budget will be delayed.’
As of 11:05 am
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