Japan’s government announced an economic stimulus package worth ¥11.7 trillion (US$107 billion) yesterday to tackle surging energy costs and the looming threat of a recession.
The plan includes measures to help consumers, companies and farmers cope with high fuel costs as well as loan facilities for small firms facing a credit crunch.
With lending-related measures accounting for much of the package, the boost to actual government spending is expected to be about ¥2 trillion.
“This package is not a one-off,” Japanese Economic and Fiscal Policy Minister Kaoru Yosano told a press conference. “It is aimed at continuously supporting the Japanese economy, as well as people’s lives.”
The plan includes steps to help people find jobs, boost the agricultural sector, reduce expressway tolls and provide loan guarantees for small and mid-sized firms struggling to secure access to funds.
It also aims to encourage the use of energy-saving technology and provide support for new parents and healthcare.
Japanese Prime Minister Yasuo Fukuda announced plans for an economic support package shortly after reshuffling his Cabinet at the start of this month in an effort to reverse a slump in his approval ratings.
The government has faced calls from some lawmakers within the ruling coalition for a bigger injection of public money in the economy, which shrank in the second quarter, raising fears of the first recession in six years.
But ministers have also stressed the need to rebuild the country’s debt-ridden finances, saying they hope to avoid issuing new bonds to fund the stimulus package.
Experts doubted the package will have a significant impact on the overall economy.
Fresh spending of up to ¥2 trillion “is insignificant,” argued Richard Jerram, an economist at Macquarie Securities.
“Signs that economic activity is proving fairly resilient, as well as growing hope that inflation is close to a peak, means there is little sense of desperation among policy makers,” he said.
Japan’s public debt is the highest among industrialized nations after the government spent trillions of yen on emergency spending packages in the 1990s to try to revive the recession-ravaged economy.
Earlier, the government reported Japan’s core headline inflation figure hit a fresh decade-high last month, while consumers spent less for a fifth straight month as the country’s longest post-war expansion grinds to a halt.
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