TOKYO: Japanese Prime Minister Taro Aso on Friday announced a new 23 trillion yen ($255 billion) stimulus package to shore up his country’s economy, with measures to spur employment, encourage lending and inject capital into financial markets.
“The global downturn is said to be a recession on a scale that comes once in a century,” Mr. Aso said.
The new package includes 10 trillion yen ($111 billion) in tax breaks and public financing, and provides for up to 13 trillion yen ($144 billion) to address the credit crunch, including capital injections for lenders and other financial institutions.
As the global financial picture continues to darken, governments are fast-tracking massive stimulus plans to shore up their economies. European Union leaders looked set to back a $260 billion package on Friday, after plans announced in recent weeks in India, China and the U.S.
Friday’s announcement comes on the heels of 27 trillion yen in measures announced in October, which included expanded credits for small businesses and a cash payout to every household to spur spending. “Since then the economy has worsened beyond our expectations,” Mr. Aso said.
The total comes to at least 40 trillion yen, with some overlap in the two sets of financial measures. Mr. Aso pointed to falling stocks and the surging yen, and said the newest package was needed to boost employment and stabilise Japan’s economic system. He said it would provide support including tax breaks for workers affected by the economic slowdown and home buyers, as well as funds for injection into markets and support for mid-sized businesses.
Before Mr. Aso’s announcement on Friday, the yen surged to a 13-year high against the dollar.
The U.S. currency sank to 88.16 yen in afternoon trading in Tokyo, its lowest level since August 2, 1995. Japanese stocks plunged as the yen surged; the benchmark Nikkei 225 stock average slid 5.6 per cent to 8235.87.
A strong yen is especially painful for Japan’s export-driven economy as it cuts into profits made abroad, even as slowing demand drags down sales.
The new stimulus plan was announced as Mr. Aso and leaders from China and South Korea were preparing for their first trilateral summit, to be held on Saturday in the southern Japanese city of Fukuoka. The summit was expected to be dominated by financial issues. — AP