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Japan Plans 18.6 Trillion Yen Economic Package to Support Growth

Dec. 4 (Bloomberg) -- Japan plans an 18.6 trillion yen ($181 billion) package to counter the impact of a sales-tax bump in April, as Prime Minister Shinzo Abe tries to sustain a recovery in the world’s third-biggest economy.

The steps will include 5.5 trillion yen in fiscal spending, according to an official who asked not to be named, citing government policy. The government will use tax revenue to fund the package, forgoing new bond sales, the official said.

Abe needs to support growth as the increase in the sales tax will hit consumers just as inflation takes hold, cutting into their spending power. Bank of Japan Governor Haruhiko Kuroda said this week the bank won’t hesitate to adjust policy if needed to achieve its 2 percent price target, although risks from the higher sales tax are not so high.

“It doesn’t affect my view on the economy,” said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo. “The size of the actual spending remains at 5.5 trillion yen.”

The Yomiuri and Nikkei newspapers earlier reported the size of the package. The measures will also include spending by local governments and about 10 trillion yen in loans to small- and medium-sized companies, the Nikkei newspaper reported.

To contact the reporters on this story: Kyoko Shimodoi in Tokyo at kshimodoi@bloomberg.net; Masaaki Iwamoto in Tokyo at miwamoto4@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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