PM pledges $150 billion to ease recession pains
Date created : Latest update :
Japanese Premier Taro Aso (pictured) has pledged $150 billion of emergency spending, worth some three percent of GDP, aimed at easing Japan's worst recession since World War II ahead of a key election later this year.
AFP - Japanese Premier Taro Aso vowed Friday to ease the pain of a crippling recession with 150 billion dollars of emergency spending, drawing the battle lines ahead of a key election this year.
Aso unveiled his long awaited package, which includes spending of 15.4 trillion yen (150 billion dollars) -- worth about three percent of Japan's gross domestic production -- in a bid to rescue the economy from its worst recession in decades.
Japan will also set up a government body that could buy up to 50 trillion yen worth of shares from the market using public funds in the event of exceptional financial turmoil, he said.
Aso pledged to "prevent the economy from falling through the floor."
"We want to reduce the pain felt by the public by securing jobs. At the same time we think it's important to increase the capacity for economic growth in the future," he told a news conference.
Aso is battling to reverse a slump in popularity ahead of crucial elections later this year that could see an end to the ruling party's almost unbroken half-century grip on power.
The premier must call an election by September, but is under pressure from the opposition to hold snap polls sooner.
The fresh spending is part of a wider package totalling more than 56.8 trillion yen (570 billion dollars), when tax cuts, loan guarantees and other measures are included.
The government said the stimulus would boost Japan's economic output by about two percent in the fiscal year to March 2010 and create up to 500,000 new jobs.
Financial markets, however, reacted nervously after Finance Minister Kaoru Yosano said the government was likely to sell new debt worth more than 10 trillion yen to pay for the new outlays.
"We are concerned that it might have a negative impact on the bond market," said Morgan Stanley economist Takehiro Sato.
RBS Securities analysts added: "Waves of supply worries are rippling through the market" over the prospect of massive new government borrowing.
Japan's gross public debt is already more than 170 percent of gross domestic product -- the highest among industrialised nations.
Tokyo spent trillions of yen on emergency stimulus packages to try to haul the economy out of its deflationary doldrums after the economic bubble burst in the early 1990s.
The latest injection comes on top of stimulus measures approved by parliament since October that were worth a combined 75 trillion yen, of which actual fiscal spending was about 12 trillion yen.
The new plan includes money for clean energy generation, elderly and health care, employment support and the promotion of cultural products and tourism.
Plummeting worldwide demand for Japanese cars, machinery and high-tech goods has put Japan on course for its worst economic slump since World War II.
Japan's economy logged its worst performance in almost 35 years in the last quarter of 2008, shrinking at an annualised pace of 12.1 percent. Analysts expect another sharp contraction for the first quarter of 2009.