Japan’s finance minister said yesterday that aggressive public spending would be needed on a scale of possibly ¥20 trillion (US$208 billion) to wrest the economy out of a painful recession.
Finance Minister Kaoru Yosano, who also serves as financial services minister, acknowledged the government forecast for flat growth for fiscal 2009, ending on March 31 next year would probably have to be revised soon to account for the deep contraction seen in recent months.
Japan’s economy has been battered by the plunge in exports that continues unabated since the US financial crisis hit last year.
The IMF is expecting the Japanese economy to contract 5.8 percent for the current calendar year.
The Japanese government has said the economy contracted at an annual pace of 12.1 percent for the October-to-December quarter. Data show the slowdown is dragging into this year.
“Unless there is considerable recovery in the latter half, it would be hard to keep it within the forecast,” Yosano said on a nationally televised news program on TV Asahi.
Yosano said that the amount of spending wasn’t decided yet and experts need more data to decide on the right allocation, including where to spend the money.
The effort will also need to be discussed in parliament, Yosano said.
But Yosano said the numbers being tossed around in recent Japanese media reports of between ¥2 trillion and ¥3 trillion for the spending package weren’t enough to address the growing social woes such as unemployment.
“That is not enough to cope with what is happening in our society or is about to happen,” he said. “Speaking from a gut level feeling, ¥20 trillion is a good number.”
Japan’s unemployment rate stood at 4.1 percent in January, relatively high for a country that has valued stable employment for decades.
Worries are growing that this number will rise as companies go bankrupt and are hit with losses amid a global downturn.
Japan has already decided on a stimulus package of about ¥12 trillion, including tax breaks for companies, cash payout to individuals, assistance for businesses and reduced toll fees for roads, to try to fix the health of the world’s second-largest economy.
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