Tomo Kinoshita, Research Analyst at Nomura, notes that the Nikkei article says the Japanese supplementary budget will include measures to stimulate flagging private-sector consumption.
Key Quotes
“Starting with measures to reduce waiting lists for nursery schools and with premium shopping vouchers, measures already expected to be in the government’s concrete Plan to Realize the Dynamic Engagement of All Citizens (ie, Abenomics 2.0), which is scheduled to be announced this May.
However, these measures will not require ¥5trn, and the larger the supplementary budget is, the larger the portion of expenditures devoted to public works is likely to be. The Nikkei article also notes that the FY16 budget expected to be passed by the Diet this week is likely to be executed ahead of schedule, making room for additional spending on public works under the supplementary budget in the latter half of FY16.
However, given the labor shortage in the construction industry, we doubt that increasing spending on public works will have the big impact on the economy that it once had. A key issue for the government then will be finding measures that will have a stronger stimulative effect on the economy. The release of first preliminary GDP data for Jan–Mar on 18 May and movements in financial markets, including the yen forex market are expected to be major determinants of the supplementary budget’s scale.”
(Market News Provided by FXstreet)