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Kyodo/AP
Prime Minister Taro Aso

Japanese PM Unveils Stimulus Package

October 31, 2008 06:20 PM
by findingDulcinea Staff
In a move to alleviate the country's financial crisis, Prime Minister Taro Aso announced a stimulus package worth about 29.9 trillion yen.

Aso Hopes Stimulus Will Jumpstart Economy

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The stimulus package will attempt to revitalize regional economies and protect individuals from the financial crisis with benefits payments, regional expressway toll cuts and increased tax breaks on home loans. It will entail about 5 trillion yen in government spending and the redirection of about 1 trillion yen in road-related tax revenues to municipal governments. Aso also said that he would like to raise the consumption tax sometime during the next three years.

“The economy is experiencing a violent storm seen only once every 100 years,” Aso said to reporters about the global financial crisis, according to the Japan Times. “Steering is unprecedentedly difficult. The government will (apply) full power.”

The stimulus will give about 60,000 yen in cash benefits to a family of four. It will be financed by a plan to avoid issuing deficit-covering bonds and by special account budget reserves.

Aso also announced that he will not dissolve the House of Representatives for a general election, as the ruling parties had expected.

On Friday, Japan also became the latest country to cut key interest rates, underscoring fears of a global recession. The Bank of Japan cut its key lending rate by 20 basis points to 0.30 percent and warned that the country’s economy would experience little growth this year—about 0.1 percent, and 0.6 percent next year. The cut was slightly smaller than expected and did not prevent a downturn in Japanese shares, with the Nikkei stock index closing down 5.01 percent.

Key Player: Taro Aso

Former foreign minister and secretary general of the ruling Liberal Democratic Party, Taro Aso inherited a fractious, chaotic government earlier this year from former prime minister Yasuo Fukuda, who unexpectedly resigned in September. The 67-year-old Aso, an outspoken, hawkish conservative who is in favor of a tougher foreign policy, is charismatic but prone to making controversial statements, according to the BBC. Last month he compared the opposition's tactics to those of the German Nazis, and during a previous campaign made a joke about Alzheimer's disease. The grandson of post-war premier Shigeru Yoshida, he comes from a prominent political family. Aso competed for Japan in shooting at the 1976 Montreal Olympics and is known for his love of manga comics.

Opinion & Analysis: The ramifications of Aso's choice

Aso's decision to delay dissolving the government in order to focus on the economy with his economic stimulus measure is in alignment with public opinion polls. "According to The Yomiuri Shimbun's and other opinion surveys, more and more people favor a delay in dissolving the lower house, saying that the top priority should be given to economic measures to boost the economy. Aso's decision apparently took into consideration these public views."

Aso's delay of the elections has caused widespread speculation over when the crucial vote for the parliament's lower house will occur. Public opinion polls indicate that the ruling party would probably lose if they were held right now. One Yomiuri newspaper's headline read, "The earliest lower house dissolution: Xmas," and predicted that in that case, a vote would be held on Jan. 25. Christmas could be too soon for Aso, however, who needs to raise his approval ratings and stabilize the country's faltering economy before the elections, says Reuters. "Christmas would be quite difficult," said Keio University political science professor Yasunori Sone. "Aso may be preparing for that, but chances that he won't be able to do it are high."

The Mainichi Daily News
asks whether the tax rebate plan, which is to be funded by deposits from a special account called "buried gold," is the most effective way to prop up the ailing economy. "Of course, the source of this lavish spending is not really mysterious buried gold, but the treasure of the people … Prime Minister Taro Aso must have proposed this policy in a serious bid to boost his approval ratings, after suspending dissolution of the House of Representatives for a general election. Nonetheless, giving away other's people's money is not exactly what we would call generous, and a song of self-appraisal is the least we need right now."
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