Japan's New $1.1 Trillion Support Package

Japan's New $1.1 Trillion Support Package

almost 4 years ago2 mins

Japan announced $1.1 trillion of extra spending on Wednesday, in an effort to rid the economy of the lingering effects of the pesky coronavirus 😷

What does this mean?

The world’s third-largest economy doubled down on last month’s spending measures with another, similarly-sized support package that brought the total to $2.2 trillion – equivalent to 40% of the country’s annual economic output 🗾 The package ranks among the world’s biggest used to deal with the pandemic, and includes support for struggling businesses, rental payments, and healthcare services.

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The government also set aside almost $100 billion of emergency cash in case the country’s hit by a second wave of infections 🦠 But some experts argue it mightn’t be needed at all: as one of the few countries that didn’t impose a national lockdown in the first place, Japan has fewer restrictions to ease – the tentative process that's often behind a second spike in cases.

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Why should I care?

At more than twice the size of its economy, the Japanese government’s debt load is already one of the biggest in the world. But all this new spending has to come from somewhere, so it’s no coincidence Japan announced it’s adding to that debt by bringing this year’s total bond issuance to $2 trillion 💴 That, in turn, is putting extra pressure on the country’s central bank, which has been trying to keep the government’s borrowing costs low by buying up bonds to increase their price and lower their yields.

Japan recorded a government debt equivalent to 238% of GDP in 2018
Japan recorded a government debt equivalent to 238% of GDP in 2018

Japan’s massive spending package wasn’t the only one to hit the news on Wednesday: the European Union made last week’s proposed $550 billion aid package official, while also upping its support to $800 billion – with the additional cashola coming in the form of loans to the regions and sectors worst affected by coronavirus.

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