Japan is battling its deepest recession since Second World War with exports and domestic consumption plummeting and cuts in production and thousands of layoffs. Its economy shrank in fact 3.1 per cent in October-December from the previous quarter and is expected to have shrunk a further 2.5 per cent in January-March.
The government needs immediate results in light of upcoming elections. But analysts have warned that such a plan is likely to only have a short-term impact on personal spending without improving productivity. It will also not help the country rethink and reorganise its industrial model and economy.
“The contents [of the plan] look like temporary measures to front-load demand, but they do not pay attention to increasing productivity on the supply side,” economist Masamichi Adachi said.
Japan is the most debt-ridden industrialised country in the world and has already earmarked 33.3 trillion yen in new bonds for this fiscal year.
The stimulus plan also faces a potentially stormy ride through parliament, where the opposition controls the upper house and can stall legislation.
Mr Aso has threatened to bring forward an election due by October this year if the opposition stalls the package.