Japanese Prime Minister Yoshihide Suga will announce next week a plan for fresh stimulus to help the recession-stricken economy shake off the coronavirus crisis, four government and ruling party sources with direct knowledge of the matter said.
Although the size of the package has yet to be decided, some ruling party lawmakers have already called for one of about 10 trillion yen ($95.51 billion) to cushion the blow from the pandemic.
The bulk of the package will consist of about 7 trillion yen left over from a 10 trillion yen pool set aside to meet emergency needs to combat the pandemic, the sources told Reuters. The rest will be made up of new spending, they added.
The total size of the package will likely be smaller than a combined $2.2 trillion rolled out in two earlier stimulus packages this year, they said.
"It's better to avoid making Japan's fiscal cliff even steeper" by ramping up near-term spending too much, one of the sources said.
The package is likely to include extensions to existing programmes offering subsidies to help companies keep jobs and address funding strains, the sources said.
The government is also expected to extend past January a campaign offering discounts to domestic travel to rescue the country's tourism industry, the sources said.
A third extra budget will be compiled around mid-December to fund part of the package, they added.
After posting its worst postwar contraction in the second quarter, Japan's economy is expected to have rebounded in the three months through September.
But the recovery has been patchy and fragile, as continued weakness in consumption and capital expenditure offset a rebound in exports and output, keeping policymakers under pressure to top up fiscal and monetary support.
Analysts, however, say the expected new stimulus package will have only a limited effect in boosting growth.
"The size of the package isn't expected to be that large," said Takeshi Minami, chief economist at Norinchukin Research Institute. "That means the measures will likely focus on putting a floor on growth, rather than stimulating the economy."
