Abe Plans $61 Billion Infrastructure Spending for Japan Revival

  • Country aims to double overseas visitors to 40 million by 2020
  • Japan targeting a fourfold jump in overseas cruise passengers

Japan Stimulus: The Details and Disappointments

Japan will spend 6.2 trillion yen ($61 billion) on infrastructure to help double the number of tourists visiting the country, speed up construction of a magnetic levitation line and aid building projects overseas.

The spending, approved by the cabinet on Tuesday, is part of a 28 trillion yen stimulus package Prime Minister Shinzo Abe flagged in a speech last week to revive the world’s third-biggest economy and speed its exit from deflation. The government will support expansion of ports to accommodate large cruise ships, boost airport capacity in the Tokyo area and regional economies, and strengthen transportation hubs, it said in a plan released Tuesday.

Japan is aiming to double the number of overseas visitors to 40 million by the time of the Tokyo Summer Olympics in 2020. The government will also provide loans to help bring forward the completion of a Nagoya-Osaka maglev link, originally scheduled to open in 2045, by eight years, it said.

“The impact on the transportation and tourism industry from the economic package will be huge,” said Ryota Himeno, an analyst in Tokyo at Citigroup Inc. “There’s a limit to how much the government can increase tourism in Tokyo, Osaka and regular tourist areas. By teaming up with local governments and businesses and thinking flexibly about how to encourage tourism, they will be able to handle the increased demand.”

Maglev Line

There were 1.1 million visitors to Japan by cruise ships last year, more than double a year earlier, according to figures from the transport ministry. Japan wants to increase that to 5 million by 2020, according to a plan by Abe.

Central Japan Railway Co. is developing a 9 trillion-yen maglev line and ran a train a year ago at a record 603 kilometers (375 miles) an hour. The Tokyo-Nagoya segment of the route is scheduled to open in 2027 and cost 5.5 trillion yen, while the extension to Osaka is set to start construction in 2035.

Any spending on the maglev extension is unlikely to have an immediate impact on JR Central due to the time periods involved, according to Kazuhiro Noda, president of DZH Financial Research.

“The spending on the maglev construction, ports and other infrastructure is likely to take time,” Noda said. “Still, I commend the government on its forward looking support for long-term projects.”

JR Central’s current plans require it to raise 3 trillion yen to fund the extension to Osaka, with the remaining amount to be paid for through internal funds. The government is offering low-interest loans to speed up the opening of the Osaka link. JR Central President Koei Tsuge said in a faxed statement Tuesday that details will be ironed out.

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