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Sunday, Oct. 17, 2010
Economic package on deck
The Kan Cabinet has adopted a ¥5.05 trillion spending package to help the economy overcome persistent deflation and the yen's recent rise in value against the U.S. dollar. It will submit a supplementary budget consisting of the package to the Diet by the end of this month, with the hope of getting it enacted by early December.
The government expanded the size of the package from an initial plan to spend some ¥4.8 trillion. People are seriously worried that economic conditions may rapidly deteriorate. The ruling and opposition camps, if they have a sense of crisis, should make efforts to pass the supplementary budget without delay.
The package focuses on five areas: job creation and human resources development (some ¥300 billion), economic growth in promising industries (some ¥300 billion), medical and nursing care services, support for child-rearing and other social welfare measures (some ¥1.1 trillion), revitalization of regional economies and support for small and midsize enterprises (some ¥3.1 trillion) and deregulation. In addition, public-works spending worth some ¥200 billion will be front-loaded.
The government says the package will have an economic effect worth ¥21 trillion, increase gross domestic product by 0.6 percent and create or protect 450,000 to 500,000 jobs. Prime Minister Naoto Kan said he would like to ensure that the economy exits deflation and achieves a self-sustaining recovery.
To finance the budget, the government, instead of issuing bonds, will allocate the tax-revenue surplus for fiscal 2010 as well as surpluses from the shrinkage of debt service costs. But this may make it difficult for the government to find funds for the fiscal 2011 budget.
In an attempt to stimulate regional economies, some ¥1 trillion will be spent for public works projects such as repairs of roads and bridges. The package also includes measures to secure rare earth metals, which are vital for high-tech products, and support for the export of infrastructure to emerging economies.
The ruling and opposition parties must put their brains together to produce the best policies to stave off an economic crisis.