This week Japanese Prime Minister Shinzo Abe’s Cabinet approved a 28.1 trillion yen ($280 billion) multi-year fiscal stimulus package, including 5 trillion yen ($50 billion) for this fiscal year. More details on the plan are available from Kyodo News and The Wall Street Journal (log-in required).
The yen strengthened last week on expectations of the stimulus announcement and continued to gain momentum this week, averaging 101 yen to the dollar – up about 23 percent year-over-year. The yen also reached this level in early July when it strengthened after the “Brexit” vote in the United Kingdom, but is otherwise at its strongest point versus the dollar since July 2014.
The stimulus package will be in the draft budget to be presented in an extraordinary session of the Diet, which will likely convene in mid-September. During this same session, the Diet will also deliberate Abe’s plan to postpone an increase in Japan’s consumption tax rate – from the current 8 percent to 10 percent – from April 2017 to October 2019. Ratification of the Trans-Pacific Partnership (TPP) could also be taken up in this session.