Japan’s New Government Favors a Strong Yen

The Democratic Party of Japan won a big majority in recent elections. Among other political measures, the DPJ plans to implement fiscal stimulus measures focused on increasing household disposable income.

Indeed, according to the DPJ manifesto, we should expect a new wave of emergency economic measures with ¥14.1 trillion (2.8% of GDP) fiscal stimulus focusing on increasing household disposable income. The party is also promising an annual $3,300 stipend for families for each of the children, free education, and elimination of highway tolls and expansion of unemployment insurance. It also pledges support for farmers and revitalization of farming and fishing through individual income subsidies.

In addition, The Democratic Party of Japan favors a strong value of the yen. Indeed, the DPJ lawmakers are against moving currency rates artificially. They claim that the weak currency is desirable if Japan wants exports to be its driving force. However, they also think that boosting the yen is essential in stimulating purchasing power if growth is to come from personal consumption.

Anna Fedec, contact@tradingeconomics.com
9/2/2009 10:08:30 AM