Japan released a record $ 490 billion spending package on Friday to cushion the economic blow of the Covid-19 pandemic, counteracting a global trend towards the withdrawal of stimulus measures due to the health crisis and adding tensions to their finances.

Spending has skyrocketed due to a series of payments, including those criticized for being unrelated to the pandemic, as cash donations to households with youth ages 18 and under, and will likely lead to the issuance of new bonds this year.

Massive spending would underscore the prime minister’s determination Fumio Kishida, who was considered a fiscal conservative, to focus on reviving the economy and redistributing wealth to households.

Although Kishida was known in the past to be somewhat aggressive, he seems willing to continue the Abenomics paradigm for several more years, “said James Brady, an analyst at Teneo.

The package includes 55.7 trillion yen (about $ 490 billion) in expenses for items ranging from cash payments to households, subsidies to companies affected by Covid-19 and items reserved for emergency expenses due to a pandemic.

The amount of spending was much higher than the 30-40 trillion yen estimated by the markets, and will be financed mainly from an additional budget of around 32 trillion yen that will be compiled this year. The rest will probably be financed from next year’s budget.

The total package, which includes funds that do not generate immediate expenses, will likely reach 78.9 trillion yen.

“We will mobilize all available tools to finance the package, including the issuance of bonds that cover the deficit,” Kishida told reporters, in which he did not specify how much debt could be issued.

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Japan has been unable to emerge from the pandemic-induced recession, forcing monetary policymakers to maintain massive fiscal and monetary support even as other advanced nations cut back on such measures.

Policymakers hope the new spending will help shore up the economy, which contracted more than expected in the third quarter due to the impact on consumption and exports of pandemic restrictions and global supply disruptions.


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