By Leika Kihara and Kantaro Komiya

TOKYO (Reuters – The strong victory of the ruling party in Japan’s parliamentary elections on Sunday will put pressure on Prime Minister Fumio Kishida to raise the budget for a pandemic relief package. It should ease fears about bond issuance and market anxiety.

Kishida pledged to put together a stimulus package that would “several tens to trillion yen” to ease the impact of the COVID-19 economic crisis. However, he did not provide any specifics about how much it will cost or what the payment plan would look like.

During his election campaign, he rejected opposition calls for more spending and a reduction to the sales taxes. He maintained that Japan cannot lose sight of the necessity to control its enormous public debt. It has doubled its economic size.

Analysts believe that Kishida, his Liberal Democratic Party, (LDP) maintaining its single-party majority at the powerful lower House, will be less under pressure to listen to such calls.

Japan may have experienced flat to slightly negative economic growth between July and September. A spending package of around 30 trillion Japanese yen ($263billion) would be sufficient as a political gesture,” Saisuke Sakai (senior economist, Mizuho Research and Technologies), said.

He stated that Kishida has won enough seats and doesn’t have to increase the spending package in order to combat opposition plans for a bigger fiscal stimulus.

Japan Innovation Party emerged as the biggest winner of opposition. This party came in third place in the lower chamber after the LDP.

Yoshimasa maruyama, chief economist of SMBC Nikko Securities said that the strong performance of Innovation Party was a signal of growing support for a small government. “The Japanese public opposed excessive fiscal expansion.”

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Kishida announced Monday that he is preparing the stimulus package for mid-November. He also stated his intention to submit a supplement budget to parliament by the end this year.

Kishida stated, “We will have to issue bonds in order to finance necessary emergency measures to improve people’s lives,” without commenting on how much or what size the bond issuance would be.

As a rough estimate, the market has priced in around 30 trillion Japanese yen for this package. It may be used to issue new debt, but is not sufficient to shake financial markets.

Kishida hopes that the package will be delivered in time for an economy trying to recover from the effects of the pandemic.

Even though the emergency ban was lifted on September 30, consumers have not yet started to open their doors. The export-reliant economy is being affected by rising input costs and supply constraints.

Reuters polled analysts and found that Japan’s economy will have experienced an average annual growth of 0.8% over the third quarter before accelerating to 4.5% in this quarter.

Some scars were left by Sunday’s election. A few LDP executives were defeated, including Akira Amari who is a leader of Kishida’s growth strategy, and was responsible for LDP’s emphasis on economic security.

Amari won proportional representation despite this, but domestic media reports that he will resign.

Yasuhide Yajima chief economist, NLI Research Institute said that Amari’s economic loss would have a huge impact on the country’s security policies. It doesn’t matter if he leaves or not, the outcome of his steps will be uncertain.

($1 = 114.2700 yen)