As the global economy is under immense pressure today, no developed nation seems to find it easy to wade off its impact. Japan seems to be on the front absorbing the global shock as it has a multitude of economic issues in its economy. However, some Government sources have lately indicated that Japan may go for a 25 trillion yen (230 billion USD) package to boost its economy and save it from entering into a recession.
Recently Kathy Matsui, Japan vice chair and chief Japan equity strategist at Goldman Sachs, has spoken to Bloomberg about the Prime Minister’s reform package and Japan’s current economic status with respect to the global economy.
She was asked about the details of the proposed package. Kathy replied with great optimism that the package is not going to be only focussed for the 2020 financial year; rather, it would be a long-term package. She also added that as far as the nature of the package is concerned, the main focus may fall on improving the infrastructure after a multitude of natural disasters in the last few years. It should be noted that as per the recent data, Japan’s 3rd quarter growth for 2019 stands at 0.2% in comparison to -2% in the same quarter of 2018. She also added that another dimension of the package might aim towards absorbing the negative impacts of the recent hike of consumer tax or VAT (from 8% to 10%). Japanese Government seems to be cautioned about going into recession before the 2020 Tokyo Olympics.
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Kathy said that the package mentioned above may hold the Japanese economy from falling into a recession as of now if the global scenario becomes stable. As per Goldman Sachs’s prediction, the global economy may get boosted the next financial year and many more stimulus packages are on the pipeline in many developed nations. Kathy also added that if the Bank of Japan’s monetary policy stays neutral or at zero interest rate, the outcome of the stimulus package will be at the highest.
When asked about Japan’s affordability of such a huge package, Kathy said that the package might balloon the already large fiscal deficit. However, this period is the best time to introduce the measure when the monetary policy rates are on the lower side. She was also asked about the recent measures taken by the Central Bank (BOJ) to which she replied that no such new economic concept would have the power to clear Japan’s economic distress and the Government need to accept that they have multiple problems like increasing debt, aging population, and heightened government expenditure. She seems pretty optimistic about the way Government has responded to these problems by hiking the retirement age from 65 to 70.
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Kathy also added that Japan has multiple geostrategic challenges coming from North Korea, China, and Russia. It might be the reason for the Japanese Government trying to implement fresh and radical measures to its economy like introducing more women into the workforce and embracing technology like never before. As per Kathy, for a country to sustain with a gamut of geopolitical challenges, Japan needs to have its economy living and thriving, not in a comma.
