Japan's governing coalition presented a stimulus package of 7.2 trillion yen (81 billion) on Tuesday in a bid to buttress the country's fragile economic recovery, which could underpin Prime Minister Yukio Hatoyama's popularity ahead of elections next year. A 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 to 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, is struggling to balance those economic concerns with a campaign promise to rein in government spending. "We've reached the utmost limit in terms of financing," Mr. Hatoyama said Tuesday. The $81 billion package - which is equivalent to about 1.5% of Japan's gross domestic product - includes $39 billion to prop up regional economies and pay for public works project. 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.
The International Monetary Fund predicts that Japan's economy - the largest in the world behind that of the United States - will shrink 5.4% this year, more than the 2.7% decline forecast for the United States and the 4.5% decline seen for euro zone.
(Source: nytimes.com)
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