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.
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.
The People’s New Party, a junior coalition member headed by Financial Services Minister Shizuka Kamei, blocked the stimulus plan last week, calling for a larger package to defeat deflation.
Coalition parties agreed to boost the size of the measures by 100 billion yen to accommodate those requests. That increase will need to be funded with so-called construction bonds, Motohisa Furukawa, a vice minister at the Cabinet Office, told reporters late yesterday.
The government said some of the package will be paid for with funds frozen from the previous administration’s extra budget. It wants to avoid selling new bonds as much as possible,” the statement said.
Japan has the world’s largest public debt, with liabilities that are approaching twice the size of the economy.
Finance Minister Hirohisa Fujii said bond sales for the current fiscal year will exceed tax revenue for the first time in the postwar period. The government will sell 53.5 trillion yen in bonds, more than the 44 trillion yen budgeted in April, he said. Tax revenue will slump to 36.9 trillion yen, less than the 46 trillion yen projected.
Today’s package includes 3 trillion yen in tax grants to local governments to make up for a revenue shortfall.
Japan’s exports fell at the slowest pace in a year in October as worldwide government spending spurred demand for the nation’s products, a Finance Ministry report showed today. That helped the trade surplus expand 42.7 percent from a year earlier to 1.4 trillion yen.
Other reports show the expansion may be weakening. Industrial production advanced at the slowest pace in eight months in October, wages slid for a 17th month, and consumer prices fell a near-record 2.2 percent.
Gross domestic product rose at an annual 2.8 percent rate in the three months ended Sept. 30, according to the median estimate of 17 economists surveyed by Bloomberg News ahead of tomorrow’s revised figures. That would be slower than the 4.8 percent the Cabinet Office initially reported, reflecting figures last week that showed companies cut capital spending at a record pace in the period.
The world’s second-largest economy will probably shrink 5.4 percent this year, more than a 4.2 percent contraction in the euro area and a 2.7 percent drop in the U.S., the...