Japanese Prime Minister Taro Aso yesterday announced a new ¥23 trillion (US$255 billion) stimulus package to shore up his country’s economy, with measures to spur employment, encourage lending and inject capital into financial markets.
“The global downturn is said to be a recession on a scale that comes once in a century,” Aso said.
The new package includes ¥10 trillion in tax breaks and public financing and provides for up to ¥13 trillion to address the credit crunch, including capital injections for lenders and other financial institutions.
As the global financial picture continues to darken, governments are fast-tracking massive stimulus plans to shore up their economies. EU leaders looked set to back a US$260 billion package yesterday, following plans announced in recent weeks in India, China and the US.
The latest announcement comes on the heels of ¥27 trillion in measures announced in October, which included expanded credits for small businesses and a cash payout to every household to spur spending.
“Since then the economy has worsened beyond our expectations,” Aso said.
The total comes to at least ¥40 trillion, with some overlap in the two sets of financial measures.
Aso pointed to falling stocks and the surging yen, and said the newest package was needed to boost employment and stabilize Japan’s economic system.
He said it would provide support, including tax breaks for workers affected by the economic slowdown and home buyers, as well as funds for injection into markets and support for medium-sized businesses.
Tatsushi Shikano, senior economist with Mitsubishi UFJ Securities Co in Tokyo, said the announcement had to be followed by rapid action to be effective.
He warned that some measures would not be likely to kick in until next year, postponing their effects to even later.
“The measures must be quickly carried out,” he said. “The slowdown is rapidly worsening.”
Earlier this week, Sony Corp said it would slash 4 percent of its global workforce, cut spending and shut plants. The cuts include 8,000 of its 185,000 full-time workers, another 8,000 temporary jobs and the closing of five or six plants.
Toyota has announced several production cutbacks in the last month in Japan and North America, as well as plans to cut several hundred contract workers.