Last week the government unveiled its plan to submit a supplementary fiscal 2009 budget proposal to the Diet on April 27. It includes a 15.4 trillion yen stimulus package and carries a total value of 56.8 trillion yen. This is the largest government stimulus package in Japanese history. The measures include assistance to the unemployed, subsidies in the purchase of green electronics, low emission cars and solar power generators, government guarantees to bank loans to small-mid corporations, and tax reforms to reduce gift taxes from parents to children to promote housing construction. Other measures focus on education, elderly care, recycling, and R&D.
According to press reports, "The value of the entire package is about 3% of Japan's gross domestic product -- the U.S. called for fiscal spending equal to 2% of GDP at the recent Group of 20 summit meeting. The latest stimulus package is expected to lift Japan's real economic growth rate for fiscal 2009 by 2 percentage points and lead to the creation of 400,000 to 500,000 jobs."
On the other hand, more than 10 trillion yen in Japanese government bonds are to be newly issued to finance the stimulus measures. The total amount of JGBs issued in fiscal 2009 is expected to surpass 43 trillion yen, an all-time high.
The package was by and large welcomed by the equity market.
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