Prime Minister Taro Aso yesterday ordered his government to draw up yet another stimulus package to buoy his sinking economy. In an interview with the Journal's Yuka Hayashi published on Monday, Economy and Finance Minister Kaoru Yosano said the program will "far exceed" the 2% of GDP recommended by the International Monetary Fund and will include measures to boost credit, maintain employment and strengthen the social safety net.
This takes fiscal profligacy to a new level. Mr. Aso's Administration and its immediate predecessor have already rolled out about 1.5% of GDP in new spending since the financial crisis hit last year. As of today, Tokyo estimates government debt-to-GDP is at 157.5%. The OECD puts that figure higher, around 180%. Mr. Aso said yesterday he would "not hesitate" to issue bonds to pay for his plans.
I mentioned in the most recent 4+1 commentary that the US dollar stands to be the "least worst soverign currency." Of course, 2 days later the government announced a plan to buy a trillion dollars of paper and the dollar took its biggest one-day hit in almost 50 years. I am still bullish the dollar - not necessarily because of the strength of the domestic economy, but rather because of the weakness of other economies worldwide. The stimulus of a slowing Japanese economy is another example of worldwide weakness.
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