Japan Plans Spending Increase to Combat Economic Stagnation

Long one of the world’s most productive economies, Japan is now facing an economic stall. In an effort to stimulate consumer spending, the Japanese government has planned a large stimulus package which is expected to be announced next month.

Even though Japan’s unemployment fell to a 20-year low last month, wages and household spending have continued to stagnate. It is thought that a large part of the reason for this is that employers, wary of future economic decline, have chosen to hire temporary and low-salary workers. In order to combat the decline in consumer spending, the government of Japan has stated that it will offer a series of cash injections into the economy designed to help the lowest earners. This package, which some say could be as large as $24.5 billion, will include direct subsidies to those on government pensions. It is also expected to include subsidies for childcare and elder care, allowing Japan’s effective workforce more flexibility to find employment.

The instruction from Japanese Prime Minister Shinzo Abe for his government to begin preparing this stimulus package came on Friday. Similar attempts to stimulate the Japanese economy with influxes of liquid cash have largely failed to produce long term growth. Japan’s consumer spending and its inflation rate have both been anemic in the past year, even as Mr. Abe’s attempts to grow the Japanese economy have continued. Mr. Abe has also called for an increase in the Japanese minimum wage. Many argue, however that such an increase could greatly damage Japan’s small business sector. Most minimum wage workers in Japan, it is estimated, do not work in larger companies but instead in smaller firms. These firms, already struggling, are seen as less able to bear the burden of higher employee wages.