Japan's PM boosts stimulus package

Japan's ailing economy has had a double dose of promising news with Prime Minister Taro Aso pledging a cutting-edge makeover and government data hinting that the suffocating recession may be easing.

Unveiling an ambitious long-term growth strategy, the Japanese leader called for the country to shift its focus from exports to domestic sectors poised for major growth.

Japan should lead the world in energy-efficient technologies, bolster nursing care for the elderly and unleash the untapped potential of its soft power through pop culture and fashion, Aso said.

His plan aims to increase domestic demand by at least 40 trillion ($684 billion) within three years and add between 1.4 million and two million new jobs. By 2020, Aso wants to lift gross domestic product by 120 trillion and create four million jobs.

Like its Asian neighbours, Japan's economy has been strangled by an unprecedented collapse in global demand that has sapped foreign sales of its cars and gadgets.

The world's second-largest economy is mired in its deepest recession since World War II, and Aso said the export-reliant model that had fuelled growth for the past half-century needed an overhaul.

"I want to show that Japan's future is not all that dark if we follow this vision," Aso said. "If you just read the newspapers, it seems like tomorrow will be completely gloomy. But this is not the case. There is some light."

The first step, he said, was a massive new stimulus package headed for government approval this week. Japan's ruling party is pushing for a plan that is much bigger than originally announced, involving 15.4 trillion in new fiscal spending.

The measures, equivalent to about 3 per cent of the country's gross domestic product, were approved by the ruling Liberal Democratic Party's executive council, a party official said yesterday on condition of anonymity, citing department policy.

The news sparked a stockmarket rally that sent the benchmark Nikkei 225 index soaring 3.7 per cent to its highest closing level in three months.

Included in the latest package are steps to help contract workers and small businesses, prop up regional economies, invest in "green" technologies and support elderly care, according to the Finance Ministry.

Part of the deal may include an incentive to encourage car purchases similar to the "cash for clunkers" programme debated in the United States Congress. Japan, home to several major carmakers, is considering giving 250,000 y to consumers who trade in a car 13 years old or older for a more fuel-efficient one.

The measures are likely to "significantly boost domestic demand - mainly in private consumption and government investment - from [the third quarter]this year," said Masamachi Adachi, senior economist at JPMorgan Securities in Tokyo.

Meanwhile, Japanese machinery orders, an indicator of how much the country's companies plan to spend, unexpectedly rose in February for the first time in five months.

Core private sector machinery orders, which exclude those from electric power companies and shipbuilders, grew 1.4 per cent in February from the previous month.

- AP