Japan unveils 915 bil. yen stimulus package+

OANA_NEWS




TOKYO, Sept. 10 Kyodo -
The government said Friday it will spend 915 billion yen ($10.9 billion) in its
new stimulus package to tackle the recent upsurge of the yen and downside risks
to Japan's economic growth by creating 200,000 jobs and encouraging consumer
and business spending.
The package, expected to boost the country's gross domestic product by about
0.3 percent in inflation-adjusted terms while having 9.8 trillion yen worth of
overall effects on the wider economy, was approved by the Cabinet of Prime
Minister Naoto Kan earlier in the day.
Also Friday, the government announced the nation's economy grew an annualized
real 1.5 percent in the three months through June, revising up its earlier
estimate of a 0.4 percent expansion. It also released a monthly economic
assessment which confirmed the increasing risk that the economy could be
depressed by the yen's surge against the U.S. dollar and other major
currencies.
''We will ensure growth by establishing a basis for employment and ensure
employment by encouraging growth,'' Kan told a meeting of his economic
ministers.
The premier has said he will make maximum efforts to improve employment
conditions, with the package specifying the government will help young people
find jobs by giving financial incentives to companies to employ them.
It will encourage job creation in sectors with growth potential, such as
nursing and medical care as well as the environment, energy and tourism. Other
support steps for employers include easing lending terms for smaller companies.
Chief Cabinet Secretary Yoshito Sengoku told reporters, ''The direction, rather
than the size of package, is extremely important.'' The government's top
spokesman shrugged off criticism from opposition and some ruling lawmakers that
Kan is stinting on fiscal spending to boost the economy.
Those who are critical of Kan include Ichiro Ozawa, who is challenging him in
the leadership election of the ruling Democratic Party of Japan slated for
Tuesday.
Without issuing more government bonds, Kan will finance the stimulus measures
by using reserve funds for the current fiscal 2010 budget. He has made
restoring Japan's fiscal health one of his priorities.
The Cabinet Office said that whether or not the government drafts a
supplementary budget will depend on future developments in the economy. The
package also mentioned a 1 trillion yen portion of the current budget the
government could tap in the future for payment of state-backed projects and
other purposes. Ozawa urges the government to mobilize the money immediately.
Another pillar of the stimulus is to encourage Japanese firms to spend more
capital in domestic markets. This is due largely to fears that the rising yen
is forcing large companies to turn to overseas markets for cheaper labor and
other costs.
The government will introduce programs to promote business investments in
Japan, especially in such areas as green industries committed to developing
environment-friendly technologies.
It is also considering cutting corporate tax to boost capital spending. But
Finance Minister Yoshihiko Noda told reporters the government would need to
seek funding sources to cover consequent revenue shortfalls.
In order to boost consumer spending, the government will extend some of its
subsidy programs. It will put off the deadline of the ''eco-point'' incentive
program for the purchase of energy-efficient appliances by three months to the
end of next March and that of a similar program to encourage
environment-friendly home building and renovations by one year through December
2011.
The government will ''implement policies that can rapidly respond'' to needs in
the economy, Noda told reporters.
The government said it ''will take decisive actions, including (market)
intervention, when necessary'' to stem the yen's rise against other major
currencies, while expressing hope that the Bank of Japan will take ''additional
necessary policy responses to beat deflation in close collaboration with the
government.''
The Japanese currency has risen to levels unseen in 15 years against the
dollar, which fell to the 83 yen level this week, causing a negative impact on
business sentiment, especially among exporters.
Japanese exports have also been suffering from an economic slowdown in their
major destinations such as the United States and China. As a result, it is
feared that growth in Japan could slow, adding to uncertainty over whether the
new stimulus will have the sought-after impact.
Hideo Kumano, chief economist at the Dai-ichi Life Research Institute, hailed
the concept of the package but said the government should not bracket together
tackling the yen's rise with dealing with high unemployment.
Employment issues require a long-term solution and the government must ''sit
tight'' to handle them while it must address the negative fallout from the
yen's strength quickly, Kumano said. ''We must watch to see whether this new
package will really have the desired effects.''
==Kyodo
2010-09-10 23:08:45