World’s Third-Largest Economy and Post-Covid Growth

Japan has one of the most developed economies in the world. It is worth noting that Japan announced a fresh $708 billion economic stimulus package on Tuesday. The country’s government is working hard to speed up the recovery from the country’s coronavirus-driven slump. It is not surprising that the country is ready to spend hundreds of billions of dollars to support the economy.

As part of a fresh economic stimulus package, the government will spend about 40 trillion yen ($384.54 billion) in direct fiscal spending as well as initiatives targeted at reducing carbon emissions and boosting the adoption of digital technology.

It is worth mentioning that policymakers around the world are willing to do whatever it takes to prevent a deep and prolonged recession. As a reminder, the coronavirus closed international borders and sent millions out of work. Unfortunately, millions of people around the globe are still looking for a job. Interestingly, in the U.S., a $908 billion coronavirus aid plan is currently under debate in Congress.

Economy and risk factors

As stated above, the pandemic caused serious problems for the country. Importantly, the

pandemic forced the government to put its fiscal reform agenda on the backburner. People should take into account that public debt is twice as big as its economy and this fact underlines the severity of the problem.

Hopefully, the government approved this economic stimulus package mentioned above on Tuesday, which would bring the combined value of coronavirus-related stimulus to about $3 trillion, roughly two-thirds the size of Japan’s economy. According to Prime Minister Yoshihide Suga, the fresh stimulus will boost Japan’s gross domestic product (GDP) by around 3.6%.

Interestingly, Japan’s economy rebounded in July-September from its worst postwar contraction in the second quarter. However, the third wave of Covid-19 infections has the potential to keep any recovery modest.

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It is worth mentioning that, aside from direct fiscal spending, the package included credit guarantees and loan facilities for small firms facing funding strains created by the pandemic. Moreover, the new stimulus also included steps underlining Suga’s policy priorities, eyeing a post-pandemic world. As a reminder, the major goal of the two previous packages was to cope with the immediate strain on households as well as businesses from the pandemic.

Japan, as well as other countries, suffered losses due to the coronavirus pandemic. However, the country’s government allocated billions of dollars to improve the situation. Japan, as well as other countries, should join forces to support the global economy.