Aso injects $99b into flagging economy

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(Agencies)
Updated: 2009-04-07 14:38

Japanese Prime Minister Taro Aso has ordered more than 10 trillion yen ($99 billion) in fresh spending to rescue the world's second-biggest economy from its deepest recession since World War II.

The figure amounts to more than 2 percent of Japan's gross domestic product, Finance Minister Kaoru Yosano told reporters yesterday after meeting with Aso.

Yosano said the package is part of the broader international effort to revive the global economy. "These are the instructions I have received (from the prime minister), so I would like to work toward this goal," he said.

Aso revealed last week at the G20 summit in London that he intended to put together a new stimulus package, on top of 12 trillion yen in fiscal steps that the government has implemented since last year.

The latest package will include measures to help contract workers and small businesses, boost regional economies, expand "green" technologies and support elderly care, said Yasunaga Matsuki, a spokesman at the Ministry of Finance.

Officials aim to finalize details of the latest package by Friday and then submit the extra budget proposal to parliament soon after, Matsuki said.

Japan has been hit particularly hard by the global slowdown, which has sapped foreign sales of its cars and gadgets. Exporters including Toyota Motor Corp and Sony Corp have slashed production and jobs in response.

Japan's GDP shrank by an alarming 12.1 percent annual rate in the October-December period.

The government's latest spending initiative comes on the heels of further signs of economic deterioration.

Data for February released last week showed that industrial production tumbled, household spending fell sharply, and the country's unemployment rate rose to a three-year high at 4.4 percent. A key central bank survey showed that confidence among big manufacturers plunged to its lowest point ever.

Since taking office in September, Aso has repeatedly said that restoring Japan's economy is the top priority of his government.

Lawmakers last month passed a record 88.5 trillion yen budget for the fiscal year that started April 1, which included parts of Aso's two previous stimulus packages.

Officials declined yesterday to comment on where they would find extra money, though Aso has said recently that he would turn to issuing bonds if needed. Japan's massive public debt now runs at 170 percent of GDP - the highest level among industrialized economies.

In contrast, the Bank of Japan is not expected to unveil any major policy moves when it wraps up a two-day policy board meeting today.

It has little wiggle room on its key interest rate, which is already super low at 0.1 percent. It is also buying commercial paper and corporate bonds to help firms raise funds.

Japanese billionaire clothing retailer Tadashi Yanai criticized his government's response to a severe recession as too tepid and called for tax cuts to spur domestic consumption.

Yanai, chief executive of Fast Retailing Co Ltd, said the government should shift Japan's economy away from dependence on exports and provide incentives for domestic producers. He said recent government cash handouts have been ineffective because recipients are saving the money.

"The current policy is very superficial. It's not a fundamental solution to revive the economy," Yanai told The Associated Press. "The government is focusing too much on the export industry."

"They should focus more on domestic industry to create domestic growth and demand."

Yanai, who is Japan's richest person and was worth $6.1 billion in February according to Forbes magazine, said he agreed with OECD forecasts last week that Japan's economy, the world's second-largest, will shrink 6.6 percent this year and prices will fall in 2009 and 2010.