Japanese Prime Minister Shinzo Abe on Wednesday said his government is set to unveil a stimulus package of more than 28 trillion yen ($266 billion) to boost the sluggish economy that is witnessing fragile growth and hardly any inflation.
Meanwhile, the Bank of Japan is set to begin its two-day policy session on Thursday, following which the bank is widely expected to announce further monetary easing on Friday.
Abe made the announcement in a speech in southwestern Japan and said that the package would include 13 trillion yen in fiscal measures. More details of the plan would be revealed next week.
Japanese stock markets rose on the news, while the yen, a safe-haven during turbulent times, dived.
The more than 28 trillion yen stimulus equals nearly 6 percent of the GDP and economists are treating such a huge figure with caution, saying that actual spending may be much less.
"The absence of a major crisis at the moment already raises some question marks on whether policymakers really will press ahead with such large amounts of spending," Capital Economics economist Marcel Thieliant said.
"Today's announcement reduces the chances of further monetary stimulus being introduced this week but we still think it more likely than not," the economist added.
The package aims to support domestic demand and put the economy on a recovery path, Abe said.
Expectations that the government was set to announce an economic stimulus surfaced earlier this month, as Abe tries to refresh his "Abenomics" policies to boost the economy. Markets were widely expecting a package of over 10 trillion yen.
In June, the Abe administration postponed a consumption tax hike scheduled for next April over fears that it would derail efforts to boost prices.
It was the second time that the proposed sales tax hike was postponed. The 8 percent sales tax rate was originally scheduled to be hiked to 10 percent last October.
Previously, the rate was boosted by three percentage points in April 2014, which was the first such hike in 17 years.
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