Japan PM Abe calls for public works spending plan to help economy

TOKYO (Reuters) – Japan’s Prime Minister Shinzo Abe called on Monday for a new public works spending program to stimulate the economy amid growing concerns about global risks.

The spending, which is expected in the first half of next fiscal year starting in April, will focus on strengthening infrastructure to withstand earthquakes and frequent flooding, according to a presentation made at the Council on Economic and Fiscal Policy (CEFP).

Some of Japan’s top government advisers also called for stimulus to offset a decline in consumption expected after an increase in the nationwide sales tax in October next year.

The rush to approve public works spending and other measures to support consumption highlights growing concern among policymakers about the economy.

“The prime minister asked me to take firm measures to ensure that our economic recovery continues,” Economy Minister Toshimitsu Motegi said at the end of the CEFP meeting.

“He also said the public works spending program expected at the end of this year should be compiled with this point in mind.”

Japan’s economy is forecast to contract in July-September, and a recent slump in machinery orders suggests any rebound in the following quarters is likely to be weak if exports and business investment lose momentum.

Government ministers will compile a preliminary public works plan by the end of this month and then submit a final version of the plan by year’s end, according to documents used at the CEFP meeting.

Members of the CEFP did not say how large spending should be or how the government should fund the package. At the meeting Abe said compiling the package has become an urgent matter, according to a government official.

Japan’s government is considering a 10 trillion yen ($87.77 billion) stimulus package to offset the impact of a sales tax hike next, sources told Reuters last week, as concerns about consumer spending and the global economy grow.

Increasing spending on public works started to gain support after a strong earthquake in September caused a blackout in the northern island of Hokkaido and a series of typhoons damaged transport infrastructure in western Japan.

The advisers on the CEFP are academics and business leaders who are considered close to Abe, so their recommendations often influence policy decisions.

The CEFP met earlier on Monday to debate consumer prices and fiscal policy, which is where the advisers made their recommendations.

The advisers did not lay out the specific steps the government should take to stimulate consumption, but government officials have previously said they are considering shopping vouchers for low-income earners and more spending on public works.

The nationwide sales tax is scheduled to rise to 10 percent in October 2019 from 8 percent currently.

The government already plans to exempt food and some daily goods from the tax hike to soften the blow, but there is still a lot of concern that the tax hike will wreck consumer spending and sentiment. The economy was tipped into a recession the last time the tax was raised in 2014.

Advisers at the CEFP meeting also threw their support behind the government’s plan to encourage mobile phone carriers to lower smartphone fees, saying they hoped the move would increase households’ disposable incomes.

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