Gov't aims to create jobs, boost capital spending with new stimulus+

TOKYO, Aug. 30 Kyodo -
The government said Monday it will aim to improve Japanese employment
conditions and encourage consumer and business spending with its fresh economic
stimulus package, while the Bank of Japan decided to ease its monetary policy
further by introducing a new lending program for financial institutions.
In an outline of emergency policy measures endorsed by Prime Minister Naoto Kan
and his economic ministers, the government stated it will use 920 billion yen
in reserve funds for the fiscal 2010 budget to finance the package in the face
of slower growth and the negative effects of the strength of the yen against
the U.S. dollar and other major currencies.
Kan and the ministers decided on the outline after he agreed with BOJ Governor
Masaaki Shirakawa to maintain close cooperation between the government and the
central bank in addressing economic problems.
While saying it will ''take decisive action when necessary'' in order to
prevent excessive volatility in the currency market, the government asked the
BOJ to ''underpin the economy with appropriate and expeditious management of
monetary policy.''
The government outlined the stimulus measures ''in tandem with'' the further
BOJ easing, Kan told reporters, adding that both sides will ''closely watch
what impact could be generated with the two decisions.''
Kan's Cabinet aims to finalize the stimulus package on Sept. 10 and the
ministers also agreed that the government should compile a supplementary budget
to fund the package if it proves necessary.
The stimulus centers on improving employment conditions, especially for youths,
with the government helping university and high school graduates to find jobs.
It will go as far as offering financial incentives for companies to hire more
such graduates.
The package also involved other incentive programs to encourage corporate
capital spending in the domestic market. The move reflects government concerns
that given the stronger yen more Japanese companies could move their production
bases to other countries where labor costs are cheaper than in Japan.
The government will specifically give incentives to companies investing in such
areas as environment-conservation technologies as well as offer support to
smaller businesses struggling for access to overseas markets.
In addition, the government will establish a panel chaired by the prime
minister in which state ministers, the BOJ governor, and officials from
businesses and labor unions will discuss measures to swiftly implement Japan's
new economic growth strategy over the next decade, approved by the Cabinet in
June.
On steps to increase consumer spending, the outline said the government will
expand the ''eco-point'' incentive program for the purchase of energy-efficient
appliances by extending its expiration in December. It will also consider
putting off the deadline of a similar program applied to those newly building
houses and reforming existing homes in an environment friendly way.
Hours before the government's announcement, the BOJ took additional monetary
easing steps by expanding its low interest-rate funding program due to
heightening concerns that the yen's sharp appreciation could derail the
recovery of Japan's export-oriented economy.
By holding an extraordinary policy meeting ahead of a regular session scheduled
Sept. 6-7, the central bank also decided to keep its key interest rate at a
razor-thin 0.1 percent.
The yen hit a 15-year high against the dollar last week while Tokyo stocks have
performed poorly given that the Japanese currency's rise has hurt the earnings
of exporters.
The bank's new lending facility that provides 10 trillion yen in six-month
loans to commercial banks and other financial institutions at lower interest
rates enhanced its existing scheme to supply 20 trillion yen as three-month
loans at its policy rate of 0.1 percent.
BOJ chief Shirakawa told the news conference after the emergency meeting that
the BOJ was ''conscious'' of the government's efforts to underpin the economy,
but stressed that the central bank's decision on additional monetary easing was
made of its own accord, denying speculation that the central bank had bowed to
political pressure to do more for the economy.
Speaking to reporters separately after meeting with Kan at the prime minister's
office, the governor said it is ''necessary to closely watch downside risks''
to growth in the Japanese economy.
The financial markets showed a mixed reaction as the dollar lost ground below
the 85 yen line, unaffected by the BOJ's easing decision, while Tokyo stocks
gained, welcoming the bank's move, with the benchmark Nikkei 225 index
recovering the psychologically important 9,000 mark for the first time in a
week.
==Kyodo
2010-08-30 23:10:40