Abe’s administration could create an extra budget worth about Y12 trillion ($136.2 billion), in order to boost Japan’s economy. Y4 trillion could be used for public works projects, Kyodo news agency said on Monday, citing sources close to the matter.
Prime Minister Shinzo Abe stated on Monday that he hopes to compile the measures this week.
While the measures could help regenerate the world’s third-largest economy, the problem of Japan’s public debt being twice as big as the gross domestic product is not yet solved. The situation raises the question if Japan will be able to pay the debt during the next years.
“The scale of this budget suggests that Abe’s new administration is serious about stimulating the economy,” said Masamichi Adachi, a senior economist at the financial services firm JPMorgan Securities in Tokyo and a former central bank official. “It will be very helpful in the near-time, but the problem in the medium-to-long term is that we have to pay this back.”
An extra budget of Y12 trillion would require about Y8-9 trillion in extra bond issuance, Chotaro Morita, chief strategist for fixed income at Barclays Plc in Tokyo, said, while Vice Finance Minister Yuko Obuchi said that the government would need to sell deficit-financing bonds to pay for the extra budget.