The New York Times – August 2, 2016 – TOKYO — In the three and a half years since he won the Japanese prime minister’s office on a pledge to rekindle economic growth, Shinzo Abe has tried many tactics to coax the economy into expanding.
Mr. Abe is trying to rev up an economy that, since he took office at the end of 2012, has created millions of new jobs but little wage growth. Output has flip-flopped between expansion and contraction, and deflation — corrosive declines in consumer prices — remains stubbornly entrenched.
The stimulus program represents a doubling down of Mr. Abe’s effort to promote growth and crush deflation, which has dogged Japan since the 1990s.
Though he has approved spending increases before, he has relied heavily on the money being pumped into the economy by the central bank, the Bank of Japan. This year, the bank even took the extreme measure of reducing its benchmark interest rate below zero.
The bank’s policies have let the government borrow at extremely low interest rates. Some economists saw the latest increase in spending as a sign that Mr. Abe is in effect assuming that the bank will underwrite government spending more directly in the future — an approach sometimes called helicopter money because it essentially drops money into the public’s hands.
“While helicopter money is a concept still frowned upon thus far, such coordination does make the first step in blurring the line as central banks run out of stimulus measures,” said Lee Jin-Yang, an analyst at Aberdeen Asset Management.
Mr. Lee and other economists noted that the stimulus contains only ¥7.5 trillion in new government spending, and that the money would be doled out on an uncertain timetable. The rest of the program takes the form of low-interest loans and financial guarantees, which can help stimulate economic activity but do not contribute nearly as directly to growth.
The government estimated that the stimulus would increase gross domestic product by 1.3 percent, though it did not say over how many years.
About ¥3.5 trillion will be spent on social items like wage subsidies for people who leave work to care for children or aging relatives. But more will be spent on infrastructure, including the maglev train, which the government wants to help build between Tokyo and Osaka by as early as 2037, eight years earlier than a previous timetable.