Re: the Japanese spending package, Mizuho.....>

JAPAN: Re: the Japanese spending package, Mizuho wrote this on Tuesday: "The

headline size of the second supplementary budget will be both large and

misleading. The Nikkei suggests it may be as big as Y100trn following on from

the Y117trn last month and targeted mainly at relief for the corporate sector.

Japanese nominal GDP is in the region of Y500trn, so Y100trn would be

significant. However, much of the package (as much as Y60trn) will be cheap

financing for companies hit by the pandemic. Whilst useful it is hard to gauge

the economic impact as much of this funding would likely have

occurred at a slightly higher interest rate even if the government had not

stepped in with its subsidy. The package is also expected to help virus hit

firms with their rents and to provide additional funds for local governments.

The market focus will be on any MoF announcement of the additional budget to

fund the spending, although as noted above MoF has some flexibility to spread

the costs out over time given its front loading of issuance. The government

hopes to enact the budget by 12 June."