Japan's  stimulus Efforts by Dr. Abdul Ruff Colachal

Very close on the heels of the US stimulus initiative to ward off the economic meltdown, some more advanced economies have initiated similar boosting measures. Japan's economy has been battered by a collapse in exports and is facing its deepest recession since World War II. Japan has formally unveiled its record $150bn (�105bn) stimulus package as it seeks to revive its flagging economy. Presenting the package, the Japanese Prime Minister Taro Aso said the plan is worth about 3% of its gross domestic product and aimed to protect livelihoods and to foster future growth. The 15.4 trillion yen package includes measures to boost fuel-efficient vehicles and consumer electronics. The package came out as figures showed Japan's machinery orders unexpectedly rose in February thanks to gains in the services sector. Japan's ruling coalition plans to put the stimulus package before parliament by the end of the month. The money will also be used to create a financial safety net for temporary workers, boost struggling firms, support regional economies, to promote solar energy generators, as well as to support nursing and medical services.

Japan has been worst-hit among advanced nations by the global economic downturn. The slowdown in the world's second-biggest economy is steeper than that being experienced in the US or Europe. Last week, Japan had planned to implement a fiscal stimulus plan of more than 10tn yen ($99bn; �66bn) to fight the recession. It came on top of 12tn yen of stimulus spending that has already been agreed, amounting to more than 2% of the annual output of Japan's economy. Finance Minister Kaoru Yosano said details of the new package should be finalized by April 10. It would create a financial safety net for temporary workers, boost struggling firms and support regional economies.

Already, Japan has been hit by a series of economic blows that has led Yosano to describe the conditions as the country's worst economic crisis since the end of World War II.. The country's exports plunged by a record 49.4% year-on-year in February, as worldwide demand for its products collapsed. Japan's economy contracted by 3.3% in the last three months of 2008, which was its worst showing since the oil crisis of the 1970s. And figures released last week showed retail sales in Japan suffered their biggest fall in seven years in February. Meanwhile, Japan's unemployment rate has risen to a three-year high as companies continue to slash jobs. The jobless rate rose to 4.4% in February, from 4.1% in the previous month.

Its exports have halved amid an unprecedented collapse in worldwide demand for the cars and electronic gadgets the country produces. The government has a long-term goal to shift the economy's focus from exports to domestic sectors poised for major growth. It wants to be a world leader in energy efficient technology and to bolster care for its huge and growing elderly population. The aim is to create as many as two million jobs in the next three years.

Immediately, the financial sector showed quick improvement. On 09 April, shares in Tokyo gained as details of the stimulus plan emerged. Japan's benchmark Nikkei 225 index closed at a three-month high, rising 3.74% to finish at 8,916.06. Shares in carmakers and solar power-related firms gained. An economist at JP Morgan remarked that this might contribute to GDP for a year. "The consequences over the longer term are negative as we are piling up more of a fiscal burden. Bond issuance will go up from here on." The Japanese premier told a news conference they are implementing a resolute policy in the form of economic crisis measures in order to protect the livelihoods of the people and the first objective is to prevent the economy from falling through the floor. Another objective, according to him,  is to give a sense of security to the people. This is the government's third stimulus plan in the past year. It comes on top of 12tn yen of spending in earlier packages, as well as tax breaks and cash handouts. It also creates a financial safety net for temporary workers, boost struggling firms and support regional economies. Aso said the new steps would be partially funded by issuing new government bonds. 

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Yours Sincerely,

DR. ABDUL RUFF Colachal

Columnist & Independent Researcher in World Affairs, The only Indian to have gone through entire India
South Asia.