Japan is preparing a massive stimulus package amid weak global growth. Japan's government is considering a stimulus package worth 13 trillion yen ($120 billion) to support economic growth and infrastructure needed to cope with major natural disasters, NHK television reported Wednesday. Together with private sector and other spending, the package will reach 25 trillion yen ($230 billion), with the government making a decision as soon as Friday.


Nothing can be done


Both budgets will be prepared later this month, Reuters said. Of the 13 trillion yen, more than 3 trillion yen was spent on fiscal investment and loan programs. Even though it is already heavily indebted, the government hopes to take advantage of the low borrowing costs of negative interest rates. However, the spending will add to Japan's public debt burden. Japan's public debt is already more than twice the size of its economy, one of the heaviest in the industrialised world.


Gross domestic product, adjusted for price changes, rose 0.1% in real terms in the third quarter from the previous quarter, according to government data, down 1.6 percentage points from the second quarter and well below market expectations. The international monetary fund has cut its forecast for Japan's economic growth in 2019 three times this year and called on the government not to rein in fiscal spending and to undertake larger structural reforms.


Despite the size of the overall stimulus package, real spending in the current fiscal year will be small and analysts do not expect much of a boost, Reuters said. Analysts said the supplementary budget for the current fiscal year, which is expected to total 30,000 to 4 trillion yen, would not significantly boost GDP growth. Japan's budget for the next fiscal year is set to exceed 100 trillion yen for the second year in a row, Singapore's lianhe zaobao newspaper said, underscoring the enormous challenge the government faces in boosting growth and reining in fiscal spending, which has become a desperate move to stimulate the economy amid mounting pressure from an economic slowdown.

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India is going to make a big move too?


In addition to Japan, some countries have introduced stimulus policies to boost their economies. The government cut its forecast for economic growth this year to 1.4 percent, the three o 'clock newspaper said. The finance ministry announced a $5.5bn investment in public spending, support for small and medium enterprises and other social reconstruction that is expected to create 100,000 jobs next year.


India's economic growth slowed to 4.5 per cent in the third quarter, the slowest pace in more than six years. In an effort to further stimulate the economy, finance minister pranab sitaraman said India would announce a series of infrastructure projects this month that would invest 100 trillion rupees ($1.39 trillion) over five years, Reuters reported.


Expectations for fiscal stimulus are rising around the world amid signs that the global economic slowdown is bottoming out, bloomberg said. Hong Kong's south China morning post said markets believe the worst may soon be over for the world economy. The worry is how the world has recovered from excessive stimulus since the 2008 financial crisis. It may be many years before the economy finally returns to normal, but policymakers need patience because global financial stability must be maintained.


Will the stimulus work


The global economic and financial outlook, released last week by the bank of China's institute of international finance, argues that already high government debt limits the scope for fiscal expansion in developed countries. Figures show that the ratio of government debt to GDP in developed economies averaged 104.1% in 2019, and is expected to rise further to 104.8% in 2020. Of that total, us government debt stands at nearly $23tn, or 106.2% of GDP, and is expected to rise to 108.0% by 2020. Countries with "double deficits" (fiscal and current account deficits) such as India and countries in the Middle East and Latin America that rely heavily on commodity exports have struggled to respond to the downward pressure with fiscal stimulus.


China gold group chief economist wan zhe said in an interview with the global times on Tuesday that fiscal policies can have a significant effect in stimulating the economy in the short term, but there are many constraints on the use of fiscal policies and they cannot solve the structural problems in the economy in the long run. "Fiscal policy now clearly means more state-led economic stimulus, and government action can help but is not a panacea in the event of significant economic stress. To boost the global economy, new technologies are needed and the structure of global economic governance needs to be optimized.