(-_-)＼（゜Д゜）英字新聞

Record stimulus package must be spent wisely

The government and ruling parties have compiled the nation's largest-ever economic stimulus package, worth \56.8 trillion, which includes \15.4 trillion in actual fiscal spending.
This package is about twice the size of the one hammered out during the financial recession a decade ago by the administration of then Prime Minister Keizo Obuchi.
The latest package is a drastic fiscal move aimed at arresting the worst postwar recession, but it could prove to be a double-edged sword as it would generate a huge deficit. Spending must be carried out wisely to boost the economy and strengthen its growth potential.
The government and ruling parties should expedite the compilation of a supplementary budget and its passage through the Diet in order to implement the stimulus measures, and also bounce ideas off each other to ensure the measures will truly be effective.
It is estimated that a fiscal outlay of \15 trillion would generate about \20 trillion in demand. This could compensate for insufficient demand in the economy. The Cabinet Office predicts that the employment rate, which eventually could peak at between 7 percent and 8 percent, would remain at about 5.5 percent or so if the stimulus plan were put into place. Given the current economic situation, the amount set aside for fiscal spending seems adequate.
===
Increasing employment
The measures are wide-ranging as they include moves to secure greater employment, as well as emergency measures to ease the pain caused by the economic downturn, such as financial assistance to cash-strapped small and midsized businesses. There also are measures to stimulate consumption, investment and other domestic demand. This is because the nation's economy cannot depend on external demand from the United States and other countries, as the economies of these countries are unlikely to recover anytime soon.
Subsidies for consumers purchasing fuel-efficient automobiles and energy-saving home electric appliances are expected not only to serve the original goal of helping the global environment, but also help sales of these products recover. And to make sure increases in sales are not temporary, manufacturers should do their utmost, outside of government-subsidized help, to develop new products that appeal to consumers.
Reductions in the gift tax, meanwhile, would be applied only when children or grandchildren receive financial assets from their families for the purpose of buying a home. The upper gift tax exemption limit would be raised by \5 million, but this increase appears insufficient to help increase housing purchases. Apparently concerned that the public would criticize the measure as benefiting only the affluent, government officials and ruling bloc lawmakers specified the target of the measure and decided to expand the exemption limit by only a modest amount.
If the economy is invigorated by the use of dormant financial assets held by elderly people, the entire population is likely to benefit. The scope of the gift tax measure should be further expanded to bring about a more positive effect on the economy.
===
Think beyond 3-year period
Subsidies for measures to boost benefits for care workers and improve nursing care facilities would increase employment opportunities in the growing welfare service industry. But as the subsidies are only valid for a three-year period, the impact would be temporary.
The government must secure a stable financial source to sustain the nation's social security services by increasing the consumption tax and through other measures, once the economy gets on a recovery track.
In regard to public works projects, which are considered very effective in boosting the economy, the focus will be on sectors that need a higher degree of priority, such as the environment and safety. However, thorough monitoring will be needed to make sure such labels are not taken advantage of to disguise wasteful projects.
The issuance of government bonds to implement the new stimulus package likely will exceed \10 trillion, which means the amount for the entire fiscal year will surpass \40 trillion. If the increased issuance of government bonds causes long-term interest rates to rise, it will result in decreases in private investment and a rise in the yen's value. It is essential for the government and the Bank of Japan to cooperate through such operations as the central bank's purchase of more government bonds.