Japanese PM orders extra budget to stimulate sluggish economy

20:13, September 27, 2010      

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Japanese Prime Minister Naoto Kan on Monday at a top level ministerial meeting instructed his Cabinet and ruling party members to draw up an extra budget for the current fiscal year aimed at financing a fresh stimulus package to tackle the nation's lingering deflation.

Government sources today revealed the stimulus package could total as much as 4.6 trillion yen (54.6 billion U.S. dollars) and would be comprised of existing reserves.

The sources said the supplementary budget for the year through March will aim to avoid increasing issuance of government bonds, but rather fund the package by allocating higher-than forecast tax revenue and left over funds from the 2009 budget, as well as savings on debt-interest costs from a slide in bond yields.

Chief Cabinet Secretary Yoshito Sengoku largely confirmed the view that the government does not plan to issue new bonds to raise funds.

"The government will likely move in that direction," Sengoku, its top spokesman, told reporters in reference to last week's remarks by Kan, who said the government "will study how much we can respond without issuing bonds."

The new stimulus package comes fresh on the heals of Kan's Cabinet officially approving a 917 billion yen (10.87 billion U.S. dollars) stimulus package last week, as Tokyo actively tries to counter the impact of softening export markets and a strong yen that is threatening a fragile recovery from recession.

Calls from opposition parties as well as from within his own ruling Democratic Party of Japan (DPJ) and Kan, a former finance minister known as a fiscal hawk, pledged to cut spending in a bid to reduce Japan's huge debt which stands at almost 200 percent of gross domestic product.

Kan, may now have to rethink his stance following the huge impact from the recent sharp rise of the yen which has battered Japan's exporters, a harsh employment environment and a lack of corpora and consumer spending.

The yen's rise to 15-year highs against the U.S. dollar prompted Tokyo's first currency intervention since 2004 to help buoy exporters and see off a downturn that could have thrust the world's second largest economy back into recession.

Data released by the Ministry of Finance (MOF) Monday showed Japan's export growth continuing to slow while its trade surplus fell for the first time in 15 months year on year as global demand weakened.

Source: Xinhua


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