TOKYO, April 6 – Japanese Prime Minister Taro Aso on Monday ordered fresh stimulus spending of at least 100 billion dollars to rescue Asia\’s biggest economy from its worst slump since World War II.
It would be Japan\’s biggest ever supplementary budget, highlighting mounting fears in Tokyo about the tanking economy, which has been battered by a plunge in worldwide demand for Japanese cars and high-tech goods.
"Japan\’s economic growth rate is expected to fall the most among advanced nations," Aso told reporters.
He said world leaders, who met recently in London for a Group of 20 summit on the crisis, were determined to cooperate by boosting public spending.
Aso, facing key elections this year, instructed his finance minister to draw up an extra budget of at least two percent of gross domestic product (GDP) for the 2009 financial year starting this month.
That would make the package worth 10 trillion yen (100 billion dollars) or more.
The prospect of a fresh economic boost helped the Tokyo stock market continue its recent recovery, with the Nikkei rising 1.2 percent to a three-month high. The index has gained about one quarter in less than a month.
The package 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.
Japan\’s economy logged its worst performance in almost 35 years in the last quarter of 2008, contracting at an annualised pace of 12.1 percent. The government has described the financial crisis as the worst since World War II.
The latest plan comes in response to the continued economic deterioration in Japan, Chief Cabinet Secretary Takeo Kawamura told reporters.
"The decline in Japan\’s economy surpasses that of (other) major developed countries," he noted.
Aso\’s popularity has tumbled since he took office in September, partly due to concerns about his handling of the financial crisis, although he has enjoyed a recent boost due to a donations scandal that has affected mainly the opposition leader.
His new stimulus package is expected to include measures to help laid-off workers, aid cash-strapped companies secure access to credit, improve healthcare and to encourage greater use of solar energy technologies.
The boost follows a call by the International Monetary Fund (IMF) for nations to lift stimulus spending to at least two percent of GDP, or annual economic output.
Japan\’s economy has been badly hurt by the global downturn, which has caused its exports to halve over the past year.
Major manufacturers have cut back on production and slashed tens of thousands of jobs since the crisis began. Unemployment in Japan hit a three-year high of 4.4 percent in February.
Yosano did not say whether the government would issue more bonds to finance the additional spending. Japan already has huge public debts — a legacy of Tokyo\’s efforts to spend its way out of the 1990s recessions.
In addition to the government\’s spending efforts, the central bank has slashed interest rates to 0.1 percent and taken steps to spur lending, such as purchases of bonds.
The Bank of Japan began a two-day monetary policy meeting on Monday at which it was widely expected to leave its key lending rate steady as it turns to alternative tools to try to unblock credit markets.