Posted on: Tuesday, October 16, 2001
Japan to spend $8.3 billion on jobs
Bloomberg News Service
TOKYO — Japan will spend 1 trillion yen ($8.3 billion) creating new jobs in its latest bid to shore up the economy as a tax shortfall crimps the government's ability to steer the nation out of its fourth recession in a decade.
The extra spending will be a 50 percent reduction from a 1.5 trillion yen package compiled last year.
"The total size of the extra budget will be about 2 trillion yen ($16.6 billion)," Finance Minister Masajuro Shiokawa said at a press conference. About 1 trillion yen will be used to pay for old obligations, such as tax subsidies to local governments and health spending. "That's the maximum we can do."
Ten years of pump-priming has failed to pull the world's second-biggest economy out of recession. The ruling Liberal Democratic Party has poured trillions of yen into roads, dams and bridges in so-called extra budgets since 1992, pushing the nation's debt to 130 percent of gross domestic product, the biggest in the industrialized world.
LDP chief policy maker Taro Aso yesterday repeated a second extra budget will be needed this fiscal year.
The spending has done little to help Japan's economy, which is probably in recession after shrinking at an annual 3.2 percent pace in the second quarter.
Economic and Fiscal Policy Minister Heizo Takenaka said the economy will shrink this year in line with private economists' forecasts. Economists expect GDP to fall between 1 percent and 1.5 percent.
Meanwhile, Japan's central bank lowered its assessment of the nation's economy, citing a continued tumble in output and exports, deteriorating job conditions and an increasingly bleak outlook following the Sept. 11 terrorist attacks in the United States.
The downgrade marked the fifth time in as many months the Bank of Japan lowered its view amid worries the world's second-largest economy is stumbling into a recession.
Last month, the bank's report said negative economic adjustments were "beginning" to hurt employment and income conditions. "Adjustments in economic activity are becoming more severe," it said in its report for October.
"In addition, the terrorist attacks in the U.S. have further heightened uncertainty in Japan's economy," it said.
Production and exports have been falling steadily in this nation, where corporate earnings are hurt by the global economic downturn. Japan's banks are also loaded with towering bad debts.
Encouraging new businesses has been difficult in the stagnant economy, weighed down by rigid regulations and a conservative mentality.
Unemployment is at a record 5 percent. Japan is not officially in recession, usually defined as two consecutive quarters of economic contraction. But the economy shrank by 0.8 percent for the quarter ending in June after posting 0.1 percent growth for the previous quarter.
