By Keiko Ujikane & Mayumi Otsuma
The Japanese government will spend 10.3 trillion yen ($116 billion) to drive a recovery from a recession in Prime Minister Shinzo Abe’s first major policy initiative to end deflation and boost growth.
About 3.8 trillion yen will be for disaster prevention and reconstruction, with 3.1 trillion yen directed to stimulating private investment and other measures, according to a statement released today by the Cabinet Office. Extra spending will increase gross domestic product by about 2 percentage points and create about 600,000 jobs, the government said.
“Abe will probably give the economy more shots in the arm and turn a blind eye to fiscal discipline until the elections,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “There’s a risk that long-term bond yields will rise unless the government takes measures to restore fiscal health.