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Japan unveils plan to beat financial 'tsunami'

Latest update : 2008-12-12

Japan has unveiled a 225-billion-dollar stimulus plan as the Nikkei suffered sharp falls on the back of the US Senate's decision not to bail out the auto industry. Prime Minister Taro Aso said Japan would beat the 'financial tsunami'.

AFP - Japan on Friday unveiled a giant 255 billion-dollar stimulus package, vowing that Asia's largest economy would be the first nation to beat a once-in-a-century financial "tsunami".
   
Prime Minister Taro Aso, under fire for his handling of the crisis, unveiled a flurry of measures hours after another sharp selloff on Tokyo's stock market after the collapse of a US bailout for automakers.
   
"This is a great global recession which comes once in 100 years. Japan alone cannot stay out of this tsunami," Aso told a news conference.
   
"But by taking appropriate measures without any delay, we can minimise the impact," he said.
   
"We will try to be the first to get out of the recession, at least among industrialised nations."
   
Aso said that the new package -- which still need approval by the divided parliament -- would total 23 trillion yen (255 billion dollars).
   
It includes 10 trillion yen for measures that include loans for the growing number of workers losing temporary jobs and in tax cuts for homeowners.
   
Another 13 trillion yen would consist of financial support such as possible bailouts of cash-strapped banks, in line with a new law passed earlier in the day.
   
The package comes on top of a 26.9 trillion yen (300 billion dollars) stimulus which Aso unveiled in October.
   
Since then, Japan has seen an unending stream of dreary economic data. Figures out Tuesday showed that the world's second largest economy fell into a worse recession than thought in the third quarter.
   
A recent survey showed that more than one-third of Japanese companies have laid off workers or taken other steps to reduce labour costs over the past three months to cope with the economic crisis.
   
Bearing the brunt of the crisis have been workers without regular contracts. Electronics maker Sharp Corp. said Friday it was cutting the jobs of 380 dispatch workers.
   
Under the new package, the government would offer loans to temporary workers so they can keep renting homes if they lose their jobs.
   
Aso appealed to the main opposition Democratic Party to support the new funding measures but refused their calls to call a snap election.
   
Aso's approval rating has dropped sharply after he made a series of offensive remarks, including blaming the elderly for rising health costs.
   
"I welcome talks with the Democratic Party on policies, but I have no plan to discuss dissolution," Aso said.
   
Yukio Hatoyama, the Democrats' secretary general, said the opposition wanted a thorough debate on the new package.
   
"People in their minds will definitely drift from the ruling coalition, which just tries to save its face and its pride," Hatoyama told reporters.
   
Market watchers questioned Aso's clout, predicting further trouble on the stock market next week.
   
Aso "is already a lame duck," said Hideaki Higashi, a strategist at SMBC Friend Securities. "We do not know how seriously we should believe the reported measures would be implemented."
   
Adding to corporate Japan's woes, the yen rose to a 13-year high on Friday against the dollar after the US Senate rejected an auto sector bailout. A stronger yen makes Japanese exports more expensive overseas.
   
Aso said that future budgets would fund the new package, but he did not lay out where the money would come from other than to insist Japan would not issue new debt-covering bonds.
   
Japan is already is wallowing in the highest public debt of any rich nation.
   
Earlier in the day Japan's parliament approved a law to let the government pump funds into banks to protect them from the financial crisis.
   
The United States and European countries have already pumped billions of dollars into financial institutions. Japanese banks are seen as less affected by the global credit crunch, although they have also seen sliding profits.

Date created : 2008-12-12

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