Japan Increases Stimulus $81 Billion: What Does It Know That The US Doesn't?

Japan will increase it stimulus package by $81 billion, a move that will almost certainly increase the nation’s public debt and strain the global fixed income markets, making it more likely that interest rates will rise.

Japan is concerned that its economy has not fully escaped that recession and that a strong yen is hurting the profits of its multinational companies.

Does Japan know something that the US does not? The federal government in America has discussed a second stimulus package for several months, although it has not been labeled as such. The new programs would be for jobs creation and providing loans to small business. Politicians in Washington may not have the stomach to add to the current $787 billion stimulus program because the national debt load is already over $12 trillion and growing. Covering the costs of a new plan would almost certainly mean raising taxes.

The Japanese and Chinese are certainly being more aggressive in their actions to intervene in economies that are in the early stages of recovery but could still be badly damaged by unemployment, lack of access to credit for both businesses and consumers, and weak exports.

The US can look on and see if the move in Japan actually primes the pump of Japan’s GDP. The American government may wait for results from the Far East before its acts. Unemployment is growing in the meantime and credit is tightening. Waiting another few months may make a second stimulus package too late.

Douglas A. McIntyre