Japanese Prime Minister Fumio Kishida's Cabinet approved Friday an economic stimulus package with a record 55.7 trillion yen ($490 billion) in fiscal spending to weather the prolonged fallout from the coronavirus pandemic.
The package, worth 78.9 trillion yen when funds from the private sector are included, contains some of Kishida's signature policies, such as narrowing the income gap through pay hikes and securing the nation's economic security interests.
Through the stimulus measures, Kishida, who took office last month and led the Liberal Democratic Party to victory in the Oct. 31 general election, aims to revive the domestic economy, which has yet to recover to pre-pandemic levels, while trying to meet his goal of redistributing wealth by increasing support for households and firms.
"By carrying out this economic package with a sense of urgency, we will rebuild the pandemic-hit economy and put it on a growth path as soon as possible," Kishida said at a meeting of the government's Council on Economic and Fiscal Policy held ahead of the Cabinet approval.
Kishida said the stimulus measures are estimated to push up Japan's gross domestic product by around 5.6 percent.
The fiscal spending swelled from an earlier plan of about 30 trillion yen after including additional outlays such as on national defense, seemingly unrelated to boosting the economy. It also covers government "zaito" investment loan programs and local government expenditures.
To finance the policy package, the government is expected to submit a 31.9 trillion yen supplementary budget plan for the fiscal year through next March during an extraordinary parliamentary session to be convened by year-end.
Chief Cabinet Secretary Hirokazu Matsuno told a press conference that the Cabinet will approve the draft budget on Nov. 26.
The stimulus package comes after the ruling and opposition parties called for large-scale spending during campaigning for the lower house election. However, few discussions were held on how to secure financial resources other than issuing new government bonds that will deal a further blow to the country's fiscal health.
The size of the latest measures exceeds the 48.4 trillion yen outlay for a similar package compiled in April last year by then Prime Minister Shinzo Abe's administration, which also aimed to ease the adverse impact of the coronavirus, first detected in China in late 2019.
Among key COVID-19 relief measures are 100,000 yen handouts in cash and vouchers to children aged 18 or younger in households with an annual income of less than 9.6 million yen, costing around 2 trillion yen.
Another 2 trillion yen will be given to struggling families and students, with small companies suffering from the pandemic expected to get financial aid of up to 2.5 million yen each.
The government's "Go To Travel" subsidy program will be resumed to shore up the pandemic-hit tourism sector, following a recent sharp fall in the number of virus cases in Japan. The program was suspended nationwide in December following a spike in new virus cases.
Yoshimasa Maruyama, chief economist at SMBC Nikko Securities Inc., said restart of the campaign is expected to boost household spending early next year, while cash and voucher handouts to child-rearing families are unlikely to bring such an effect.
Many of the families are more likely to put the money into savings rather than spending, Maruyama said. "If the government aims to support childcare, it should have spent more time discussing it carefully."
Among other measures, the government will urge the use of the unpopular "My Number" identification card system by giving shopping points worth up to 20,000 yen to individuals who already have or newly acquire the cards to promote the nation's digitalization while stimulating consumption.
The monthly salaries of care workers, nursery school staff and nurses, whose pay is regulated and widely seen as insufficient compared with other industries, will be raised by 1 to 3 percent from current levels.
To alleviate the financial burden on households and firms amid price surges for gasoline and other oil products, a new subsidy program for oil distributors will be implemented to contain prices once they hit a certain threshold.
Amid intensifying global competition for cutting-edge technologies and concerns about intellectual property protection, about 500 billion yen will be allocated to facilitate the development in key fields such as artificial intelligence.
The government will also assist in building state-of-the-art semiconductor factories to ensure sufficient supplies of computer chips.
In addition, around 770 billion yen will be used to improve defense equipment and buy missiles and patrol aircraft, the largest-ever defense spending under an extra budget, to address China's maritime assertiveness and the growing missile threat posed by North Korea.
Some policy measures under the package will be covered by the initial budget for fiscal 2022, to be drafted next month.