The president, Shinzo Abe, said an enormous economic package was needed to kickstart the world’s third-largest economy, which has only just emerged from recession.
“Japan has faced extraordinary challenges over the past year with internal and external factors, such as a strong yen, China’s economy slowing and the conflict in the Korean peninsula,” Abe said after signing the legislation at an extraordinary session of parliament.
“We must act and take bold steps to ensure that Japanese workers stay employed and the economy grows steadily,” he said.
The package will increase Japan’s defence budget, boost a supplementary budget and spend nearly $380bn on welfare and public services, but opposition lawmakers said it would do nothing to stimulate the stagnant economy.
The opposition party insisted that the bill, which boosted military spending by ¥160bn over five years, was a waste of money.
“I feel like I’m voting on a treasure chest full of coins that isn’t going to bring anything to the economy,” Akio Edano, the Democratic party of Japan president, told public broadcaster NHK.
“The bill that has just been passed is mostly just spending money on expensive shipyards and high-speed railways. The bill will not create growth and won’t create jobs,” he said.
The opposition has increased pressure on Abe’s Liberal Democratic party to cancel the bill and hold an election before the end of the year. The prime minister has said the bill must be passed in the autumn as agreed with the opposition.
Abe said the bill had bolstered the economy, defence, welfare and other areas – but not by enough to fund his policies.
Toshifumi Suzuki, the executive director of the Japan Research Institute, said the package could boost the economy by about 0.1 percentage points. “Assuming that the economy strengthens 0.1 percentage points a year, that means about ¥1.5tn to ¥2tn a year over 10 years. That’s a big number.”
He added that the package was unlikely to have much impact on Japan’s ageing and shrinking population. “People simply get old and die anyway. This won’t solve the economy’s structural problems.”
That said, at ¥12tn a year, the package was “preliminary, but it’s not bad”, he said.
The government has been struggling with a strong yen and weak growth since Abe took office in 2012. Abe has pledged to reboot the world’s third-largest economy, through a mix of tax hikes and promised deregulation and reforms.
The government has estimated that the economy suffered a 3.1% contraction in the final quarter of 2016, largely as a result of the strong yen, weak global growth and a hike in corporate taxes. It was the first time Japan had suffered consecutive quarters of contraction since the global financial crisis.