The Japanese government on Friday approved a second stimulus package totaling 1.2 trillion yen ( around 14.6 billion U.S. dollars) in a bid to bolster the nation's anemic economy.
The package, to be funded by reserves in the fiscal 2012 budget, is aimed at boosting social security facilities, creating more jobs and providing financial support to small and medium-sized businesses.
The Japanese Cabinet said that 880.3 billion yen (around 10.7 billion U.S. dollars), has been earmarked to be spent on these projects and to slow Japan's imminent descent into its third technical recession since 2008.
According to the government's latest figures, the world's third largest economy shrank 3.5 percent in the July-September quarter, and leading economists predict that GDP figures for the current quarter, despite an increase in industrial output in October, will confirm that the Japanese economy has entered a recession phase.
However, government officials on Friday said the new package, the second of its kind in as many months, would create a total of around 120,000 new jobs and add 0.4 percent to Japan's overall GDP within a 12-month period.
"The latest stimulus package will a have positive impact on supporting the economy as they includes deregulation measures, outlays for rebuilding the disaster-hit areas and revitalization of the economy," Finance Minister Koriki Jojima told a news conference earlier Friday.
The latest package comes ahead of a general election scheduled for December 16 and Prime Minister Yoshihiko Noda may come under fire for unrolling the spending package as a means to garner electoral votes as the ruling Democratic Party of Japan gears up to fight an almost insurmountable battle against the main opposition Liberal Democratic Party to stay in power.
The LDP and its chief Shinzo Abe will likely oust Noda's DPJ, ending a three year reign for the Democrats and Abe will almost certainly succeed Noda as Japan's Prime Minister following the December election, political pundits attest.
Noda is eyeing a third extra stimulus package for the current fiscal year through March, to be funded by an extra budget, but the successful passage of this policy will be determined by the results of the upcoming general election.
The cabinet said it has earmarked 132 billion yen to build new nursing homes and better-equip existing ones, in response to Japan 's rapidly aging society, and around 110 billion yen will be used to stimulate the job market. In addition 95 billion yen will be used to prop up small and medium-sized enterprises, the cabinet said.
Officials said Friday the government will not issue any new debt to help finance the package as Japan's public debt is already double the size of its economy and the largest in the industrialized world.
But economists are questioning the efficacy of the new package against a backdrop of an increasingly harsh employment environment, slumping exports, waning domestic demand and a perpetually strong yen.
Consumer demand, which accounts for around 60 percent of Japan' s total GDP, has been largely stagnant since last March's earthquake, tsunami and nuclear disasters, with retail sales retreating 1.2 percent in October from a year earlier, according to statistics released yesterday.
Compounding Japan's current export predicament is a territorial row with China, intensified by Japan's illegal nationalization of the Daiyou Islands in the East China Sea.
The row has soured ties between Tokyo and Beijing and has caused exports to China, Japan's largest trading partner, to slump as some Chinese consumers have boycotted Japanese goods and services.