At the same time that the Nikkei released its latest “market response” trial balloon, where it posted an article around 2am local time clearly meant for US market consumption according to which BOJ officials “were said to be leaning more toward easing”, the same Nikkei also published a preview of what Japan’s helicopter money may look like. There is just one problem: at first read, and judging by the market’s reaction, it appears to be rather underwhelming.
As the Nikkei reports, “the Japanese government has proposed distributing 10,000 yen ($95) or more to low-income individuals as part of an upcoming plan for jump-starting economic growth.”
Other proposals include a minimum-wage hike of 24 yen, or about 23 cents which would still be the most ever, to 822 yen an hour in fiscal 2016 as well as cutting the premiums that workers and their employers pay into the unemployment insurance program. The government submitted the outline to ruling coalition lawmakers Tuesday.
The plan will span a supplementary budget slated for this coming fall and next fiscal year’s main budget. The stimulus measures are expected to have a nominal value of 20 trillion yen to 30 trillion yen overall, with roughly 6 trillion yen over several years to consist of direct fiscal spending by the central and local governments. The rest would include such items as lending by government-backed financial institutions.
Some more details from the Nikkei:
Ruling bloc member Komeito’s proposal to issue vouchers meant to promote consumer spending was not included in the government-proposed outline.
The government favors distributing 10,000 yen in cash to low earners instead, but Komeito is holding out for 15,000 yen.
The roughly 22 million people who pay no residency tax because of insufficient income would be expected to qualify for the cash. Single individuals earning less than 1 million yen a year fall into this bracket.
Some more details: officials also propose lowering the unemployment insurance premium from 0.8% of an insured worker’s pay to 0.6% over several years. This would amount to 340 billion yen in relief for workers and employers, each of which contributes half. A company employee earning 4 million yen annually would save about 4,000 yen a year, which the government hopes would circulate back into the economy as spending. On the minimum wage, the Ministry of Health, Labor and Welfare will seek expanded subsidies for small and midsize enterprises to encourage them to raise pay.
Productivity-boosting infrastructure improvements will also form part of the stimulus package. Taking advantage of ultralow borrowing costs, the government plans to provide some 6 trillion yen in financing for such investments. Part of this would go toward speeding up completion of JR Tokai’s magnetic-levitation train line between Tokyo and Osaka by as much as eight years. A plan including infrastructure improvements meant to promote inbound international tourism and agricultural exports is due out later this year.
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This is all great, there is just one problem. Judging by the market’s kneejerk reaction, it was expecting more. Much more.
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