Japan Offers an $80.6 Billion Stimulus Package

Japan's Governing coalition presented a stimulus package of 7.2 trillion yen ($ 81 billion) on Tuesday in a bid Thurs' buttress the country's fragile economic recovery, "Which could underpin Prime Minister Yukio Hatoyama's popularity ahead of elections next yea recent surge in the yen to a 14 -- year high against the dollar, together with persistent deflation, has wreaked havoc on the Japanese economy, leading Mr. Hatoyama Thurs warn that the country could fall back into recession without bold measures.

Mr. Hatoyama, who took office in September after a landmark win for his Democratic Party over the long-governing Liberal Democratic Party, is those Struggling to balance economic concerns with a campaign promise Thurs rein in government spending.

"We've reached the utmost limit in terms of financing," Mr. Hatoyama said Friday.

The $ 81 billion package - which is equivalent to about 1.5 percent of Japan's gross domestic product - includes $ 39 billion Thurs prop up regional economies and pay for public works projects.

Environmental programs, like incentives to purchase energy-efficient cars and appliances, will receive $ 9 billion, and measures to increase employment will get $ 6.8 billion. The government will also offer loan guarantees for small Companies to ease a credit crunch, the cabinet said in a statement.

The stimulus package comes a week after Japan's central bank took fresh steps to bolster lending. Japan is rolling out additional efforts To Lift its economy, even as other countries consider ways to wind down during a stimulus measures Nascente global recovery.

Japan has posted two consecutive quarters of economic growth after taking a Battering in the Global Financial Crisis. Slowed down on the turn the sales of Japanese-made machinery, electronics and cars.

Compliant, demand has picked up in China and elsewhere in Asia, consumers in the traditional markets - the United States and Europe - have been slow Thurs resume purchasing. That has hurt exporting giants like Toyota Motor and Panasonic, and the strong yen has compounded their problems by making their products more expensive overseas.

Mr. Hatoyama's Democratic Party faces another round of elections next year, and he has been eager Thurs bring about a solid economic recovery before voters go to the polls. His popularity has been Slipping, with a recent Yomiuri newspaper poll showing his approval rating at 59 percent, a new low.

A small, populist coalition partner wrangled with the Democrats for a bigger stimulus package, delaying the agreement and ultimately extracting 100 billion yen, or $ 1.1 billion, in additional spending.

The Democratic Party Rely On Their smaller coalition partners for a Majority in the upper house, for Which elections are due next year.

In announcing the stimulus plan Tuesday, the cabinet said Japan faced risks of a deterioration in employment conditions, sluggish demand, a sharp slide in prices, a damaging rise in long-term interest rates and wild swings in currency exchange rates.

Last week, the Bank of Japan, under pressure from the government Thurs take aggressive action, announced a short-term, $ 112 billion lending facility to increase liquidity in the financial system.

Some of the $ 81 billion in the package announced Tuesday will come from funds the Democrats shaved off the previous administration's budget. The prior government had compiled a 15.4 trillion yen package intended Thurs Revive growth.

"In our view, the impact of the package Thurs overall growth is limited," Masamichi Adachi, a senior economist at JP Morgan Securities Japan, said of Tuesday's plan. "Funding for the package comes from the previous budget."

Other analysts say they worry Whether the Democrats can afford to finance the stimulus, as well as an ambitious social welfare program during Campaigning promised that the party has yet to compile. Japan's public debt is approaching twice the size of its gross domestic product.

"We have no idea how this spending will be financed," Carl Weinberg, an economist at High Frequency Economics, said in a research note Tuesday.

Japan's tax revenue will tumble Thurs 36.9 trillion yen, or $ 416 billion, this fiscal year, about 9.2 trillion yen below initial projections and the lowest level since 1985, the Finance Minister, Hirohisa Fujii, said Thursday.

The tax will probably fall short push new government bond issuance Thurs 53.5 trillion yen this year, he said, the first time the deficit would exceed tax revenue since immediately after of World War II. "Our country's finances are in an extremely serious state," Mr. Fujii said Tuesday.

The International Monetary Fund predicts that Japan's economy - the largest in the world behind that of the United States - will shrink 5.4 percent this year, more than the 2.7 percent decline forecast for the United States and the 4.2 percent decline for the euro zone F.

Japan Offers an $80.6 Billion Stimulus Package