Japan PM Announces $17.8b Economic Stimulus Package

Japanese Prime Minister Shinzo Abe said he would seek to implement a 2 trillion yen ($17.8 billion) spending package to expand access to education and cut waiting times at child-care centers. He made the comments shortly before his coalition partner said an election would be held, likely on October 22.

Abe said he would make use of revenue from a planned consumption-tax hike set to take effect in October 2019. Revenue from increasing the sales levy had previously been marked mostly to replace deficit spending on the social safety net. He said that he wanted to settle on the details of the package before the end of the year, Bloomberg reported.

Abe said it would be important to find a balance between spending on the policy package and improving Japan’s finances. He also wants to consider measures to increase wages and encourage investment.

The stimulus package could be a way to lure voters during the election campaign.

Meanwhile, Japanese manufacturing activity expanded in September at the fastest pace in four months as domestic and export orders picked up, a preliminary private survey showed on Monday in a sign of strengthening demand.

The Markit/Nikkei Japan Manufacturing Purchasing Managers’ Index rose to a seasonally adjusted 52.6 in September from a final 52.2 in August.

The index remained above the 50 threshold that separates expansion contraction from the 13th consecutive month and reached the highest level since May.

“Firms signaled stronger expansions in both output and new orders amid reports of firmer demand both at home and abroad,” said Annabel Fiddes, principal economist at IHS Markit, which compiles the survey, Reuters said.

“The strong end to the third quarter bodes well for production in the coming months, with business confidence also perking up slightly since August,” she said.

The index for new export orders rose to a preliminary 53.1 from 51.3 in the previous month. The flash index for new orders rose to 52.5 from 51.9 in August.

The output component of the PMI index also rose from August. The PMI survey follows government data last week showing Japan’s exports in August rose at the fastest in nearly four years due to strengthening demand from overseas, offering further evidence that Japan’s economy will continue to grow.