Japan’s debt-ridden govt plans new stimulus

Japan’s debt-laden government said Monday it planned a new round of stimulus spending worth more than 31 billion dollars to prop up a feeble economic recovery that is threatened by the strong yen.

Japan, which has this year been digging itself out of its worst post-war recession, now faces the threat of the yen trading at a 14-year high against the dollar, which hurts the profits of exporters such as Toyota and Sony.

Prime Minister Yukio Hatoyama at the weekend ordered his cabinet to work out measures to cope with the surging yen and its effects on the stock market. Chief government spokesman Hirofumi Hirano Monday announced spending of “no less than 2.7 trillion yen (31 billion dollars),” calling it “policy action in view of the strengthening yen and problems surrounding share prices.” It would be the second extra budget for the current fiscal year to March 2010, reinforcing a market view that government bond issuance for the year would by far exceed the initially planned 44 trillion yen.

The spending will further stretch state coffers in Japan, which already has a massive public debt after trying to spend its way out of the economic “lost decade” of the 1990s with a series of large stimulus packages. The outstanding balance of state debt reached 864.5 trillion yen at the end of September — some 180 percent of expected gross domestic product for the 2009 fiscal year, according to the finance ministry.

via Japan’s debt-ridden govt plans new stimulus.

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