Japan Announces $137 Billion Economic Stimulus Package
TOKYO (AP) _ Japan’s biggest economic stimulus package ever won Cabinet approval today, and government officials expressed confidence it will help jump-start the sluggish economy.
Approval of the $136.7 billion package sends a message to Japanese and overseas markets that the government is determined to engineer an economic turnaround, Trade Minister Ryutaro Hashimoto told reporters.
But the reaction from financial markets was mixed. Tokyo’s main stock index fell 1.5 percent and the dollar eased off from 15-month highs.
Traders said those trends reflected problems still plaguing the economy and disappointment that the package did not include tax cuts in land and securities transactions.
Private economists welcomed the package, but said fundamental stumbling blocks have yet to be addressed. They cited the stagnant real estate market, $400 billion in bad loans held by banks and excess manufacturing capacity.
Foreign exchange markets anticipated the size of the package. Rumors, presumed to be leaks from the government, abounded in the foreign exchange markets Wednesday that the stimulus package would exceed 14 trillion yen ($136.7 billion), above even what government officials were saying on the record.
In U.S. trading, that speculation fueled the market all day, sending the dollar to an intraday, 15-month high of 104.64 yen, not seen since June 7, 1994, when the dollar hit 105.33 yen.
In Tokyo at midday, the dollar was worth 104 yen, supported by expectations that the stimulus package will flood markets with yen, making the Japanese currency easier to come by, and consequently cheaper.
The package is meant to breathe life back into Japan’s sluggish recovery from nearly four years of recession. Five similar measures over the past several years have had a limited effect.
It provides $125 billion in public works projects, including disaster rehabilitation projects worth $6.7 billion.
An additional allocation of $13.46 billion was earmarked for programs to help areas affected by a catastrophic earthquake that devastated Kobe in January.
Other programs will try to make it easier for small business to obtain capital, and will pay for scientific research and the development of communications technology.
Of the total cost of the plan, $76.9 billion will be newly generated funds, financed with bond issues by the central government and regional administrations, a government source said, speaking on condition of anonymity.