Japan Unveils Stimulus Package

Subject – IR

Context – Japan PM Kishida unveils $490bn stimulus package

Concept –

Japan’s Prime Minister Fumio Kishida has unveiled a record-breaking stimulus package worth approximately 56 trillion Japanese yen ($490bn).
The government will compile an extra budget by the end of this year to fund the stimulus programme to deliver necessary aid to the public quickly.

What is Stimulus Package?

Stimulus package is a package of tax rebates and incentives used by the governments of various countries to stimulate economy and save their country from a financial crisis.
The idea behind a stimulus package is to provide tax rebates and boost spending, as spending increases demand, which leads to an increase in employment rate which in turn increases income and hence boosts spending. This cycle continues until the economy recovers from collapse.
- One such stimulus package was used by the United States in 2008 during the time of the global recession, which was aimed at increasing employment and recovery of the US economy.
The theory behind the usefulness of a stimulus package is rooted in Keynesian economics, which argues that recessions are not self-correcting; therefore, government intervention can lessen the impact of a recession.
A stimulus, or increased government spending, can compensate for decreased private spending, thereby boosting aggregate demand and closing the output gap in the economy.
India too used its first stimulus package in 2008 to ensure the safety of bank deposits and stability of the financial system.