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Thursday, Nov. 6, 2008

Obama victory to boost Japan, experts predict


Staff writer

At least in the short run, the Japanese economy is likely to benefit from Democratic Sen. Barack Obama's victory in the U.S. presidential election, as large-scale economic stimulus packages loom, economists said Wednesday.

The new U.S. administration said it will put together major economic measures that include tax cuts, said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management. The steps will probably boost the U.S. gross domestic product and aid Japan through increased exports, he said.

Koichi Haji, chief economist at NLI Research Institute, agrees the Japanese economy will benefit from the new U.S. administration.

"After Obama becomes the president, he will be inclined certainly to cut taxes, possibly make fiscal expenditures such as (those for) public projects, and aggressively create employment," Haji said.

He added that Obama will also likely to try to stop the financial crisis from spreading further. "In that sense, (the Obama administration) will be a plus for the Japanese economy, as well," he said.

The end of the presidential election also paves the way for fresh congressional discussion of stimulus packages, noted Satoru Ogasawara, an economist at Credit Suisse.

If tax cuts and public investment help the U.S. economy bottom out, Japanese exports to the U.S. could also recover, Ogasawara said.

Now that the election is over, Washington will probably start buying bad loans from financial institutions, a move that will stabilize the financial market and help the Japanese economy, Ogasawara predicted.

Given the decelerating global economy and declining U.S. housing prices, however, Ogasawara cast doubt on the extent of the fiscal expenditures Washington can carry out.

In the long run, the Japanese economy will not necessarily benefit from the U.S. leadership change because Democrats may take a protectionist stance on trade, Sumitomo's Muto noted.

NLI Research Institute's Haji said Japan should keep a close watch on how quickly the new administration moves to repair the economy.

Japan's business leaders also expressed hope that Obama will demonstrate strong leadership in fighting the global financial crisis.

"We hope the new president will exercise strong leadership for an early resolution of the current global economic and financial turmoil as the world economy faces unprecedented difficulties," Fujio Mitarai, chairman of the Japan Business Federation (Nippon Keidanren), said in a statement.

The head of the nation's most influential business lobby also called for "firm and stable" Japan-U.S. ties and urged the United States to play a central role in global challenges such as climate change and trade liberalization.

Information from Kyodo added



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