Japan Unveils
Economic Stimulus Package
The
Japanese government has agreed to $81 billion stimulus package
to prevent the economy from tipping back into recession as
deflation persists and a strong Yen threatens exports.
The new package, earmarked for low-interest mortgages for new
home buyers, incentives for users of ‘green’ technologies and
extended subsidies for energy-efficient cars and household
appliances, aims to encourage reluctant Japanese consumers to
spend more.
Economists said the 7.2 trillion Yen plan, representing about
1.5 percent of gross domestic product, would support the
economy, which is dependent on overseas demand for machinery,
electronics and cars.
While several other economies are already debating phasing out
economic stimulus deployed to fight the financial crisis, Japan
continues to struggle amid chronically weak consumer demand and
falling prices.
The budget underscores the balancing act faced by Prime Minister
Yukio Hatoyama and his Democratic Party.
The Democrats are keen to avoid a recession ahead of an
upper-house election next year but are also under pressure to
make good on their pledge of fiscal discipline as the country's
public debt nears 200 percent of GDP, by far the worst among G7
nations.
Japan pulled out of recession in April-June on the back of a
recovery in exports but figures due on Wednesday are expected to
show third-quarter growth was much slower than an initial
estimate.
Growth is seen slowing further in the first half of next year as
the effect of nearly 27 trillion Yen stimulus agreed by the
previous Liberal Democratic Party government, wears off.
The work on the package, originally due to be completed on
Friday, got delayed when the ruling party was forced to add 100
billion yen in spending to appease a small coalition partner,
led by outspoken banking minister Shizuka Kamei.
The Democrats need their junior partners' support to enact
legislation smoothly.
REUTERS/Yinka
