Japan is set to announce a record $490 billion spending package on Friday to cushion the economic blow from the Covid-19 pandemic, bucking a global trend towards withdrawing crisis-mode stimulus measures and adding strains to its already tattered finances, reports Reuters.
Spending has ballooned due to an array of payouts including those criticised for being unrelated to the pandemic, such as cash handouts to households with youth aged 18 or below, and will likely lead to additional bond issuance this year, analysts said.
The massive spending would underscore the resolve of Prime Minister Fumio Kishida - once considered a fiscal conservative -to focus on reflating the economy and redistributing wealth to households.
"The reflationary monetary policy and go-big-or-go-home fiscal policy pioneered by (former Premier) Shinzo Abe is now the orthodoxy," said James Brady, an analyst at Teneo.
"Though Kishida has been known in the past for being somewhat hawkish, he appears set to continue the Abenomics paradigm for several more years."
In a meeting of government and ruling-party executives on Friday, Kishida announced his plan to spend around 56 trillion yen ($490 billion) in the stimulus package, and compile an extra budget by year-end to fund the measures.
The size of spending was much bigger than the 30-40 trillion yen estimated by markets, mostly due to huge payouts to households and firms hit by the pandemic.
The total package, which includes funds that do not lead to immediate spending, will likely reach 78.9 trillion yen, according to a final version of the draft of the stimulus package obtained by Reuters.
The government will compile an extra budget of around 32 trillion yen to fund part of the cost, the draft showed.
It would include spending for defence of at least $6.7 billion, Kyodo news reported, amid rising regional tensions over China's growing economic and military power.
Critics of the package focused on its eye-popping scale.
"Inflating the size may have become the purpose with little discretion made on whether the spending would be effective," said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute. "It's a lot of wasteful spending."
The government will announce details of the package after it is signed off at a cabinet meeting later on Friday.
Japan has lagged other economies in pulling out of pandemic-induced doldrums, forcing policymakers to maintain massive fiscal and monetary support even as other advanced nations dial back crisis-mode policies.
Policymakers hope the new spending will help underpin the economy, which shrank more than expected in the third quarter due to the hit to consumption and exports from pandemic curbs and global supply disruptions.
Japan's three massive spending packages to counter the pandemic have left it with outstanding long-term debt roughly double the size of its $5 trillion economy.
($1 = 114.3200 yen)