Prime Minister Shinzo Abe approved an additional $490 billion in spending on Wednesday to stimulate the economy as officials battle to contain an uptick in inflation. The additional spending comes on top of Abe’s existing $10.3 billion stimulus package, which has raised concerns about Japan’s national debt. With some of its broadest spending increases in decades, the government hopes to slow Japan’s sluggish economic growth and create jobs and higher salaries.
Japanese GDP has been stuck on zero, between 1 and 2 percent, since 2014, while inflation – a major concern for Japan’s aging and shrinking population – is currently standing at 1.3 percent. Many Japanese companies have been hard-pressed to continue their hikes in pay as their employees have had to shoulder an increasing share of the cost of living. Economists have frequently suggested that a push for improved employment and wage growth should be at the top of the government’s agenda. With domestic demand in the U.S. vowing to remain a drag on the economy, so too might a weak Japanese economy, should Prime Minister Abe follow through on this latest stimulus package. While some economists have suggested that a low level of inflation isn’t yet a cause for concern, the Japanese government has been criticized for being slow to acknowledge the need for new spending.
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