Japanese Prime Minister Taro Aso unveiled a new stimulus package Friday, calling for 15 trillion yen ($150 billion) in government spending to lift the world’s second-largest economy from a painful recession.
The package, equivalent to about 3 percent of Japan’s gross domestic product, is intended to ward off further economic deterioration, protect people’s livelihoods and foster future growth, Aso said in a nationally televised speech.
It is also part of the global effort to spur a broad recovery, he said.
Japan has been battered by an unprecedented collapse in global demand and now faces its deepest recession since World War II. The country’s GDP shrank an alarming annual rate of 12.1 percent in the October-December quarter.
Since Aso took office in September, lawmakers have approved two stimulus packages worth 12 trillion yen in fiscal spending.
“But the rapid deterioration in Japan’s economy continues due to the downturn in exports and production,” he said. “The labor market is also quickly deteriorating.”
The plan is worth 57 trillion yen overall, including nonspending items such as tax cuts and credit guarantees, which Aso said was “the biggest in history.”
Measures include support for the jobless, help for small businesses and steps to bolster nursing and medical services. It also calls for a government-affiliated entity to buy stocks directly from the market to stem steep declines in share prices.
To foster growth, Japan will invest in its children and the environment, Aso said.
Part of the proposal includes an incentive to encourage car purchases similar to the “cash for clunkers” program debated in the U.S. Congress. Japan, home to several major automakers, will give 250,000 yen ($2,500) to consumers who trade in a car 13 years or older for a more fuel-efficient car.
The government will help homes and schools install solar panels, and give consumers shopping points when they buy energy efficient appliances, Aso said.
“This latest package represents the first step in our mid-to long-term growth strategy,” said Aso, who on Thursday outlined his vision for Japan through to 2020.
He urged the country to shift its focus from exports to domestic sectors poised for major growth, including “green” technologies, medical services and pop culture.
The long-term plan aims to increase domestic demand by at least 40 trillion yen ($400 billion) within three years and add between 1.4 million and 2 million new jobs. By 2020, Aso wants to lift gross domestic product by 120 trillion yen ($1.2 trillion) and create 4 million jobs.
Aso said the government will issue new bonds to fund the latest measures, a move that will expand Japan’s massive public debt, which at 170 percent of GDP is the highest among industrialized economies.
“But to ensure that we do not leave the next generation with massive debts, we must undertake drastic tax reform, including increasing the consumption tax,” he said.
The prime minister, however, will first need to convince lawmakers to sign on to his plan. A supplementary budget for this fiscal year, which began April 1, will be submitted to parliament later this month.
