Some have argued that the government does not have the means to support the additional spending. Economists have criticized the idea of a new spending package, arguing that the heavily indebted country needs structural economic reforms and deregulation before additional fiscal spending, Bloomberg reports.
The new stimulus, though, also comes as market observers speculated the Japanese government would announce a new 50-year Japanese Government Bond plan in the coming days, which could help fund the new round of fiscal spending.
Some Abe advisors have said the Bank of Japan and the government could combine further monetary easing with more public spending, the Wall Street Journal reports. The central bank holds over a third of outstanding government debt.
Related: Hedged Japan ETFs to Capitalize Off Additional Stimulus
“This looks very much like the market quickly put two and two together and came up with a very appealing answer — the government was moving toward specifically issuing longer-term debt to finance some larger than expected stimulus plan,” Derek Halpenny, analyst at Bank of Tokyo-Mitsubishi UFJ, told the Financial Times.
Looking ahead, investors will also need to watch for the BOJ’s policy meeting on Friday.
WisdomTree Japan Hedged Equity Fund