The spotlight is now on Shinzo Abe’s plans for fiscal stimulus after his ruling party scored a convincing victory in the July 9 election to the upper house of the Japanese parliament.
Many economists call for immediate monetary and fiscal stimulus in the Far Eastern country as the Japanese economy is still plagued by underlying economic weakness. 
Worse still, the already weak Japanese economy has been exacerbated by ‘Brexit’, the British referendum that decided to leave the EU. 
Some economists point out that Japan is quite vulnerable given the weak economic indicators and its safe haven status. If financial conditions continue to tighten in Japan as a result of weaker equity markets and a stronger yen, this will likely exacerbate the weakness in Japan’s economic outlook. This is partly the result of sluggishness of investment growth and weak foreign demand. 
Abe had cast the election as a referendum on “Abenomics”. The Japanese government is reportedly planning to compile a post-election stimulus package that could exceed 10tn yen ($99bn).
The electoral outcome may bolster Abe’s grip over the conservative party that he led back to power in 2012 promising to reboot the economy with hyper-easy monetary policy, fiscal spending and reforms.
Abe declined to say how big the package might be. Economists worry the government will choose big-ticket infrastructure projects rather than implement tough structural reforms.
Details of the scale and financing of the package remain unclear, although Abe had pledged to take “broad, bold” measures to support the economy on June 1 as he announced a delay to a planned sales-tax increase. 
Abe earlier said he would order ministers to begin compiling the stimulus package. One of his advisers had even said that should be 20tn yen ($199bn) in the current fiscal year.
Lower-than-projected tax revenue and a 778bn yen aid package after a series of earthquakes in the Kumamoto area in April means there’s not a lot of leftover money in the budget to finance stimulus. 
The Japanese ministry of finance said funds remaining from fiscal 2015 leave about 250bn yen available for additional spending. Also, the decision to postpone the levy hike until October 2019 means that new sources of tax revenue are unlikely to appear in the near term.
Abe also made it clear that he would attempt to spur economic growth through spending. “The theme of the autumn parliament will be to push ahead with economic policy, in other words to speed up the escape from deflation,” he said on a live-streaming website. “That’s what’s needed.”
Data suggest that the world’s third-largest economy has struggled to find a sustainable growth strategy, and has contracted in five of the past 10 quarters. 
In that context, a fiscal package could provide a welcome boost, yet Japan must also find a medium-term path to fiscal consolidation.