As the global recession deepens, it is no surprise that a number of countries are taking action. For many countries, the only path left to economic stimulus is quantitative easing. Japan is one of those countries; one of the weapons to be used in order to combat the recession is a $154 billion economic stimulus plan.
For Japan, this is fairly huge. The $154 billion represents about 3% of the country's GDP. There is a tax break for gift money that parents can give their children to buy a home, and there are loan guarantees for financial institutions that want to buy stocks.
More details are expected to be unveiled tomorrow, including measures that should help lending to businesses, unemployment benefits and support the development of solar energy. Japanese officials know that taking on this debt may not be great for the underlying fundamentals of the economy. However, reports the Financial Times, they insist that things could be much worse:
Using fiscal policy aggressively “will damage the already poor fiscal position but tolerating extended deflation and recession would probably be worse for the path of government debt,” he said.
Japan plans to issue bonds in order to help pay for the spending spree. The reasoning behind the increased spending is remarkably similar to that used by the U.S. when defending its large economic stimulus plan spending.
See Also
- Global Recession and Currencies
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