The Bank of Japan, a state-run bank that lends to consumer finance companies with the goal of stabilizing and guiding the Japanese economy, has announced this week that they plan to increasing the amount of money loaned by their organization as well as not only extending the special lending programs that are intended to encourage consumer borrowing, but doubling the amount of money available through this operation. The amount of the possible investment is massive, with an increase of 60-70 trillion yen (approximately $58-68 million) poured into money market operation, 50 trillion yen (around $48 million) invested into government bonds, as well as real estate investments and exchange traded funds each year. The special lending program, run under the auspices of Stimulating Bank Lending Facility, is designed to spark spending by making loans to various financial institutions that allow them to make lower risk investments to the general sector.
This growth in government spending and loans is likely a preemptive measure that is designed to increase spending in the upcoming quarter, as many have predicted that spending will go down after a scheduled sales tax increase. The current Japanese Prime Minister, Shinzo Abe, has marked his tenure with a series of policies designed to boost the domestic economy through injections of cash into the market. However, the increase of sales tax from 5% to 8% has raised concerns that his work will be undone by consumers hesitant to purchase new goods in an only recently revived economy. The hope is that the increased flow of cash from the state will offset these losses and boost confidence.
The board members of the Bank of Japan have voted unanimously in support of this plan. However, confidence in this plan is not universal. The yen rose after the announcement of this program, but almost immediately began to decline. Others have noted that this last quarter has been one of relatively contracted growth when compared to those before, and that with the scheduled rise in sales tax, that there is no reason to believe that this upcoming quarter will show much improvement. Optimists have countered that the number of jobs, income, and investments have been steadily improving. And, after nearly two decades of recession, any boost is a welcome boost.