Aso: Emergency stimulus plan needed quickly

Kyodo News

Prime Minister Taro Aso said Thursday he has instructed the Liberal Democratic Party-New Komeito ruling bloc to compile additional pump-priming measures in response to the global financial crisis.

New measures “are necessary because the outlook for the global financial situation and its impact on the real economy are extremely uncertain,” he told reporters after issuing the orders to Kosuke Hori, chairman of the LDP’s Policy Research Council, and his counterpart in New Komeito, Natsuo Yamaguchi.

The ruling bloc is thus expected to unveil steps that include new tax breaks and more public works spending.

It is also considering reviving a law to inject public funds into the capital bases of regional financial institutions. “It will be a ‘super emergency’ (economic package),” Hori separately told reporters after meeting with Aso.

“We have to submit (the new measures to the Diet) promptly after the (fiscal 2008) supplementary budget is enacted,” he said, suggesting the coalition will try to iron out the new economic package in one to two weeks.

On financial resources for the new measures, Hori said he has told Aso that issuing deficit-covering government bonds should not be ruled out.

But Chief Cabinet Secretary Takeo Kawamura told reporters this option was not presently being considered.

“Though we will make a decision after taking into consideration the ruling parties’ progress on the matter, we are not thinking about (issuing) deficit-covering government bonds at this moment,” he said.

As for the contents of the planned new package, the ruling parties have been considering measures to increase domestic demand, stabilize the financial system and stimulate stock markets, coalition lawmakers said.

It will also likely include a further cut in expressway tolls, more support for small and midsize companies and tax reductions in housing loans and business investment, according to Jiji Press.

The government and ruling parties crafted an ¥11.7 trillion emergency economic stimulus package at the end of August to mitigate the impact of soaring energy and food prices on households and businesses.

A ¥1.81 trillion extra budget to implement part of the package cleared the House of Representatives Wednesday and the House of Councilors is expected to pass it into law as early as Oct. 16.

But calls for additional measures have grown within the ruling camp because the policy package was compiled before the worldwide financial turmoil was exacerbated in September by the bankruptcy of major U.S. securities firm Lehman Brothers Holdings Inc. and global stock plunges.