Japan's Abe orders extra spending, handouts for pensioners, to pump up faltering recovery

Package will likely exceed 3 trillion yen (C$32.45 billion)
By Elaine Kurtenbach
|payroll-reporter.com|Last Updated: 11/30/2015

TOKYO (AP) — Prime Minister Shinzo Abe has ordered Cabinet ministers to prepare an extra spending package, including cash handouts for the poorest pensioners, seeking to breathe fresh life into Japan's stalling recovery.

The amount of the supplementary budget has not been decided, the chief government spokesman, Yoshihide Suga, said Friday after the Cabinet met.

Local media said the package will likely exceed 3 trillion yen (C$32.45 billion) and will be prepared in December, for approval early in the new year.

It will likely include one-time subsidies of 30,000 yen (C$324) for cash-strapped pensioners. Suga said it also will include provisions to help farmers improve their competitiveness as the Japan opens its markets further as part of a Pacific Rim trade agreement, the Trans-Pacific Partnership.

Suga said the measures are part of broader plan announced by Abe to increase Japan's gross domestic product to 600 trillion yen (C$6.49 trillion) by 2020.

The extra spending aimed at farmers and seniors, bastions of support for Abe's Liberal Democratic Party, also will likely find favour among voters ahead of an election next summer

Japan slipped into a mild recession in the spring. Although the jobless rate fell to a 20-year low of 3.1 per cent in October, according to data released Friday, consumer spending and incomes also edged down as the tight labour market failed to spur significant increases in wages.

Abe has proposed a raft of policies meant to help workers cope with child and elder care, part of a "mobilization to ensure active participation of all members of society.''

Ultimately, the fate of his "Abenomics'' approach, which has relied heavily on pumping cash into the economy, hinges on getting consumers and companies to spend more and thus boost demand.

So far, short-handed employers have resorted to use of overtime and hiring more temporary workers, seeking to avoid increases in base wages that would be difficult to reverse if the economy takes a turn for the worse.

Household spending fell 2.4 per cent in October from the year before, and average incomes fell 0.9 per cent, Friday's data showed.

Japan's inflation rate also was lower in October, with core inflation excluding volatile food prices down 0.1 per cent for the third month in a row.

Abe has called for raising Japan's minimum wage, which is now at a modest 798 yen (C$8.63) an hour on average, by 3 per cent a year, aiming to get it up to 1,000 yen (C$10.82) an hour by 2020.

Big companies, reaping record profits thanks to strong export earnings, can afford that.

However, most people paid the minimum wage work for small and medium-size companies that cannot afford to pay more, said economist Masamichi Adachi of JPMorgan.

"Those small tiny firms, which are always losing money and don't pay taxes, are not making money at all. If they have to raise wages their losses will grow and they will find it hard to survive,'' he said.

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