Japan Introduces New Stimulus Package  09/10 05:41

   TOKYO (AP) -- Japan's economy isn't quite as weak as first thought, but it 
still needs help, the government said Friday as it unveiled details of a new 
$11 billion stimulus package.

   Revised figures showed that gross domestic product expanded at an annualized 
rate of 1.5 percent in the April-June period, an improvement on the meager 0.4 
percent reported in last month's preliminary report.

   That report had indicated a barely growing economy and triggered widespread 
concern about the health of Japan's export-led recovery. The latest numbers, 
which put Japan on par with U.S. growth rates, are better but not great. Growth 
has fallen sharply since the 5 percent annualized rate recorded in the first 
quarter, and the future looks increasingly murky.

   It was at least enough to buoy investor sentiment for the day. The Nikkei 
225 stock average led regional gains, finishing up 140.78 points, or 1.6 
percent, at 9,239.17. The improved growth figure stemmed from higher capital 
spending by companies. Corporate investment expanded 1.5 percent, compared with 
0.5 percent growth in the Cabinet Office's preliminary figures.

   The government, however, moved quickly to announce its latest plan to fend 
off worrying headwinds. Prime Minister Naoto Kan's Cabinet approved new 
stimulus measures worth 915 billion yen ($10.9 billion). The previously 
announced package aims to boost domestic consumption, fight deflation and 
tackle fallout from a strong yen, which hit a new 15-year high this week.

   A strong yen is painful for the country's vital exporters because it reduces 
the value of repatriated profits and makes their products less competitive 
overseas. Toyota Motor Corp. has said that every 1-yen climb versus the dollar 
saps 30 billion yen ($358 million) from operating profit.

   The fresh injection sets Japan apart from the rest of the developed world, 
which is winding down stimulus spending even amid signs of a cooling global 
economy. Since Kan revealed his plans last month, the package has been 
criticized by analysts as too little to make any meaningful impact.

   The government says the package will lead to 200,000 new jobs and raise GDP 
by about 0.3 percent.

   About half the money will go toward extending consumer subsidy programs for 
energy efficient homes and appliances. Other measures include job support 
programs for new graduates and steps to convince companies to keep jobs in 
Japan instead of moving factories overseas because of the strong yen.

   "The direction, rather than the size of package, is extremely important," 
said Chief Cabinet Secretary Yoshito Sengoku, according to Kyodo news agency.

   The government said it will "continue to monitor movements and adopt 
decisive measures when necessary. It also expressed hope that the central bank 
would work with the government to enact additional policy measures if needed.

   Hamstrung by massive debt, the government will not issue new bonds to fund 
the emergency measures. It will instead tap into a reserve fund in this year's 
budget.

   News of the package comes four days before a ruling party leadership 
election. Kan faces a fierce challenge from veteran lawmaker Ichiro Ozawa for 
presidency of the Democratic Party of Japan. Because the Democrats control a 
majority in the lower house, whoever wins Tuesday will almost certainly become 
prime minister.

   Masayuki Kichikawa, chief economist at Bank of America Merrill Lynch in 
Tokyo, describes the latest stimulus as "limited" and expects more to come in 
the months ahead.

   "Whether Kan or Ozawa wins, I think the government will need to devise some 
additional stimulus measures," he said.


(KA)