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Wednesday, Jan. 16, 2013
Stimulus package alert
The Abe Cabinet on Friday endorsed an emergency economic stimulus package designed to buoy the sagging economy. It is only second in size to the one adopted after the Lehman Brothers shock in the fall of 2008. Government spending will reach ¥10.3 trillion. If spending by local governments and the private sector is added, its size will reach ¥20.2 trillion.
The package, which places an emphasis on public works projects, may help enliven the economy in the short term. But there is a danger that the package will bring back the pork-barrel politics of days gone by, which is associated with pressure from certain industries and "tribal" lawmakers representing their interests.
There is also no guarantee that the package, with its emphasis on public works, will contribute to strengthening the Japanese economy in the medium and long term. Related spending must be strictly watched to prevent its wasteful usage on dubious projects.
The orientation of the Liberal Democratic Party and Komeito government's stimulus package is clearly different from the Democratic Party of Japan government's policy of stimulating the economy through direct distribution of public money to households, such as the universal child allowances and free high school tuition.
Under the package, the government's spending for public works projects amounts to ¥5.2 trillion, topping the ¥4.6 trillion in the initial fiscal 2012 budget. Although the LDP used to criticize the DPJ's policy of splashing public money about, the new stimulus package relies on the issuance of a large amount of bonds. The DPJ administration limited bond issuance for fiscal 2012 to ¥44 trillion. But the LDP's economic stimulus package will push up bond issuance in fiscal 2012 to more than ¥50 trillion.
The stimulus package includes ¥3.2 billion to develop a new type of reactor by using the technology of the dormant fast-breeder reactor Monju and ¥1.36 billion to nurture personnel to build reactors abroad. This shows that the Abe administration is determined to revive the nuclear power industry, disregarding critical safety issues and environmental problems stemming from the stockpiling of nuclear waste.
Because the Abe administration decided on the total amount of the package first without initially selecting necessary projects, chances are high that money will be squandered on nonessential projects. A Finance Ministry official admitted that bureaucrats from various ministries have included items that resemble such spending. For example, the stimulus package will include ¥180.5 billion demanded by the Defense Ministry for such purposes as the purchase of PAC-3 land-to-air missiles.
If the government is determined to spend money on public works projects, it should concentrate on repairing and maintaining the nation's aging and decaying infrastructure, which, as the December accident in the Chuo Expressway's Sasago Tunnel showed, can have fatal repercussions.
The Abe administration will do everything in its power to boost the economy in the months before next summer's Upper House election. The public should not forget the ultimate goal of Prime Minister Shinzo Abe is to win that election so he can lay the foundation for amending the Constitution's war-renouncing Article 9. Such a change would end Japan's long-standing policy of maintaining a purely defensive military posture.