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In view of the growing depletion of the Bank of Japan's monetary policy instruments and the uncertainty surrounding the policy of the US presidential candidate Trump, Japanese policymakers began to see fiscal stimulus as the most likely next step in stimulating economic growth.
The market turmoil caused by the triumph of Trump made decision-makers feel uneasy, which also gave the parliamentarians in favor of increased spending to support their position opportunities, the first possible step is to re-add this year's budget.
The Bank of Japan's new monetary policy goal is to maintain a 10-year bond yield near zero, which has the opportunity to curb long-term financing costs so that their spending plans do not actually bear the cost of interest rates.
"Fiscal reform is critical but the uncertainty surrounding the Japanese economy is really increasing, which is why it is important to take effective fiscal policy," said Chaiyama Yasuhiko, a Japanese prime minister.
"Overall, low interest rates help to implement fiscal policy."
In fact, government officials say Mr. Abe could set a small budget for the fiscal year that could include austerity measures.
An anonymous source said that if the market turmoil led to "the global economic stagnation, it may be reasonable to increase financial expenditure.
Members of parliament have postponed efforts by the Japanese Finance Ministry to control spending on social welfare. Social spending accounts for one-third of total government spending, and it is growing every year because of a rapidly aging population.
US dollar against the yen on Wednesday low of 101.19 yen, Trump won the US presidential election boosted investors buying safe-haven yen. But after the Trump spending policy will push up the inflationary expectations prompted the dollar rebounded to about four-month high.
Government officials stressed that there is no plan to draft another large-scale fiscal spending plan, or take the "helicopter money" approach. Helicopters spilled money that the central bank through the acquisition of government bonds, direct financing for government spending.
But if market volatility continues and threatens a fragile economic recovery, Japan may not have much choice but to rely on fiscal policy. Analysts said Trump's trade protectionist stance meant that the US could hardly agree to Japan's intervention in currency markets to curb the yen's rise.
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