Japanese Prime Minister Naoto Kan’s cabinet approved a 5.09-trillion-yen (62.9-billion-dollar) stimulus package Tuesday to address the yen’s rise and counter deflation.
The government aims to spur domestic demand, improve the business environment and revitalize regional economies with the package, which includes public works projects.
The government must still gain approval from parliament of some 4.43 trillion yen, to cover most of the cost of the stimulus through a supplementary budget for the financial year ending March 2011.
The government would to cover the rest of the cost through surpluses carried over from the previous year’s budget.
New government bonds are not expected to be issued to cover the supplementary budget. It would be the first time since 1999 for Japan not to issue any new debt to pay for an extra budget to finance a stimulus package.
“We drafted the budget after listening to opposition parties. I believe there is enough possibility that they will agree with us,” Finance Minister Yoshihiko Noda was quoted by Kyodo News as saying.
The latest package is more than five times larger than the 918-billion-yen stimulus approved by the government in September to the create new jobs and encourage consumer and business spending. Falling prices have been a major concern for Japan, suggesting persistent deflationary pressure in the economy.
The yen hit a fresh 15-year high of 80.41 yen to the dollar Monday. On September 15, the yen first touched a 15-year high against the dollar, prompting the central bank to sell off yen for the first time in six years.
A stronger yen has a negative impact on Japanese exporters, making exports less competitive and eroding overseas earnings when revenues are repatriated.
