The administration plans to outline stimulus steps to buttress the slowing economy and counter the yen’s rise, possibly by month’s end, government sources said Thursday.
Chief Cabinet Secretary Yoshito Sengoku told reporters in the morning that the government is keen to draw up the stimulus measures “as soon as possible” after the policy research council of the ruling Democratic Party of Japan submits proposals.
Having initially planned to compile the steps at the start of September, the government has decided to speed up the process as the outlook for the economy is being darkened by the yen’s rapid appreciation and falling stock prices, the sources said.
The government also wants to compile the measures before Sept. 1, when the DPJ plans to register candidates for its presidential election.
The stimulus measures will likely include steps to improve the employment situation, spur personal consumption, aid small and medium-size companies hit by the slowing economy, help young graduates find jobs, and provide financial aid to people remodeling their houses.
The government is considering using some ¥920 billion in a reserve fund under the fiscal 2010 budget and an ¥800 billion surplus in the fiscal 2009 budget to finance the package.
The DPJ’s policy research council submited its proposals to Prime Minister Naoto Kan later in the day, while Cabinet ministers discussed stimulus steps in a meeting after the DPJ proposal.
The Bank of Japan is reportedly considering further monetary easing to back up the government’s moves.
Given the development, the yen retreated to around 84.70 to the dollar as of 5 p.m. after surging to a 15-year high of 83.60 per dollar earlier in the week amid speculation policymakers would act to stem the currency’s advance. Tokyo stocks rose to 8,906.48, up 61.09 points, at Thursday’s close.
A stronger yen adversely affects the earnings of exporters, including high-tech and auto manufacturers.
“The economy runs the risk of sliding back into a recession” if the currency continues to advance, said Yoshiki Shinke, senior economist at Dai-ichi Life Research Institute. “Investors are under the assumption that the government and the Bank of Japan won’t do anything, so it’s important for both of them to indicate their willingness to act.”
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