The Japanese government will spend 1 trillion yen ($12.3 billion) on a second round of fiscal stimulus as it tries to revive an economy at risk of sliding into recession.The government will tap reserve funds from this fiscal year’s budget, Chief Cabinet Secretary Osamu Fujimura told reporters in Tokyo today. The latest measures follow the announcement of 750 billion yen of stimulus last month.
Opposition leader Shinzo Abe, the leading contender to become prime minister after a Dec. 16 election, has called for unlimited easing and an increase in the central bank’s inflation goal to as much as 3 percent from 1 percent. His comments last week triggered the biggest two-day decline in the yen against the dollar in a year as investors speculated that more aggressive monetary loosening is looming.
Between 1992 and 1999, Japan passed eight stimulus packages, totaling roughly $840 billion in today's dollars. During that time, the debt-to-Gross Domestic Product (GDP) ratio skyrocketed, the country was rocked by massive corruption scandals, and the economy never recovered. All Japan had to show for it was a mountain of debt and some public works projects that look suspiciously like bridges to nowhere.