Japan Releases Stimulus Package As Recovery Weakens

Posted By on December 7, 2009

Japan Releases Stimulus Package as Recovery Weakens

By Keiko Ujikane and Toru Fujioka

Dec. 8 (Bloomberg) — The Japanese government unveiled a 7.2 trillion yen ($81 billion) economic stimulus package amid signs the recovery and Prime Minister Yukio Hatoyama’s popularity are waning.

Hatoyama’s first stimulus plan includes 3.5 trillion yen to help regions, 600 billion yen for employment and 800 billion yen on environmental initiatives, the Cabinet said today in a statement in Tokyo. The measures had been delayed because of haggling within the coalition government.

The Democratic Party of Japan, which took office in September pledging to support households battered by two decades of economic stagnation, is grappling with a slide in prices and a surging yen. The government will say third-quarter economic growth was slower than initially reported in revised figures tomorrow, according to economists surveyed by Bloomberg News.

“It’s a necessary step,” said Martin Schulz, senior economist at Fujitsu Research Institute in Tokyo. “Without another stimulus package, it’s very likely that the economy will fall back into recession. The government simply can’t risk this right now.”

The yen has weakened since climbing to a 14-year high of 84.83 against the dollar on Nov. 27. The Japanese currency traded at 89.07 at 11:41 a.m. in Tokyo from 88.99 before the announcement. The Nikkei 225 Stock Average fell 0.5 percent.

“Risk factors include a deterioration in employment conditions, sluggish demand because of deflationary pressure, a rise in long-term interest rates and movements in the currency markets,” the statement said.

“Excessive and disorderly movements in foreign-exchange rates can inflict considerable adverse impact on the economic recovery and the government will watch movements sternly.”

Japanese policy makers are adding stimulus measures just their counterparts around the world consider how to withdraw them as the global economy recovers.

The Bank of Japan released a 10 trillion yen credit program last week, satisfying government calls for it to do more to fight declining prices. Under the program, the central bank will offer three-month loans to commercial banks at 0.1 percent interest. In a meeting with central bank Governor Masaaki Shirakawa last week, Hatoyama applauded the move and refrained from pushing for further monetary easing.

Mor at …….  http://www.bloomberg.com/apps/news?pid=20601087&sid=aYX8OEq28vtA&pos=1

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