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Economy

Abe instructs ministers to compile economic package after disasters

First stimulus in three years to focus on repairing damaged infrastructure

Prime Minister Shinzo Abe's government is putting together a stimulus package that in part will support growth in the wake of October's consumption tax hike to 10% from 8%

TOKYO (Kyodo) -- Prime Minister Shinzo Abe instructed ministers on Friday to draw up an economic package to assist reconstruction in areas hit by recent natural disasters and to cope with downside risks at home and abroad.

The government plans to earmark necessary funds for the package, expected to be worth a few trillion yen, in a supplementary budget for fiscal 2019 through March and in the fiscal 2020 budget, government officials said.

In the first economic package in three years, spending on reconstruction work will likely receive a priority after a series of natural disasters in recent weeks damaged roads, bridges, river embankments, houses and farming facilities in a wide area of the country.

"Recovery and reconstruction from the disasters is the first pillar of the economic package," Abe was quoted by Chief Cabinet Secretary Yoshihide Suga as telling ministers earlier in the day.

Japan has already initiated a three-year program through fiscal 2020 to enhance preparedness and resilience against natural disasters, with a policy package worth about 7 trillion yen ($64 billion). The government is considering expanding the package, sources familiar with the plan said.

While increasing public spending, the government will also have to continue with its efforts to improve its fiscal health, the worst among major developed countries. The issue will be focused as government work to draft its fiscal 2020 budget will intensify next month.

Besides infrastructure spending, the government aims to allocate funds to support growth in the new package after it raised the consumption tax from 8 percent to 10 percent on Oct. 1, just before Typhoon Hagibis hit the nation.

The package will also include steps to support domestic farmers who will be affected by the recent trade deal between Japan and the United States, the sources said. The agreement, which will likely come into force as early as January, includes reduction and elimination of Japanese tariffs on U.S. imports.

"We hope to realize self-sustained growth led by domestic demand even after hosting the Tokyo Olympics and Paralympics in 2020. I want (the package) to enable Japanese people to have more confidence in the economy," Abe told a parliamentary session.

The Cabinet decided Friday to spend about 130 billion yen in a separate emergency package to respond to immediate needs in the areas ravaged by Typhoon Faxai in September and Typhoon Hagibis in October.

The funds -- part of the 500 billion yen in reserves from the state budget for fiscal 2019 through March -- will go to rebuilding damaged infrastructure and homes, and assisting small and medium-sized companies as well as farmers, the government said.

The government plans to give a maximum of 3 million yen each to households that saw their homes destroyed, while small and medium-sized companies in the four hardest-hit prefectures of Miyagi, Fukushima, Tochigi and Nagano will receive subsidies to rebuild their businesses.

As tourism is another sector reeling in the aftermath of the natural disasters, the government plans to offer a discount of 5,000 yen a night per person for those visiting the disaster-hit areas.

The scheme is expected to run from December to March, a government official said, adding that details are still to be worked out.

The full impact of the disasters is still being assessed but the domestic agriculture, fisheries and forestry sectors alone sustained 218.52 billion yen worth of damage across 38 of the country's 47 prefectures. Over 88,000 homes have been confirmed either damaged or destroyed, according to the government.

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