Japan will issue a package of steps to support the economy by the end of this month, Economics Minister Kaoru Yosano said, as the world's No 2 economy grapples with high energy and food prices and faces the risk of a recession.
The government has drafted a framework of the package, including measures aimed at helping people cope with a higher cost of living, providing financial assistance to small firms, and helping industry develop energy-saving technology.
But the government has not yet determined the financial amount of the package. Analysts say any drastic spending cannot be expected even though the government must implement the measures before a general election that must be held by September 2009. "I got an impression that the government is facing a dilemma on the need to stick to its reform drive while feeling pressure to stimulate the economy to prepare for the election," said Yasunari Ueno, chief market economist at Mizuho Securities.
"But the scale of fiscal spending is limited," he said. Stressing the importance of restoring fiscal health - with Japan's public debt amounting to 1-1/2 times its gross domestic product - Yosano said the government would stick to its goal of balancing the budget in the fiscal year ending March 2012 as it implements the economic package.
Yosano added that the government and ruling bloc didn't discuss whether they would seek to compile an extra budget to finance the package during their meeting on Monday to consider the economic measures.
"As we have pledged to adhere to fiscal reform, the scale of the economic package will be moderate," Yosano told a news conference after the meeting. Prime Minister Yasuo Fukuda, who reshuffled his cabinet this month to bolster his flagging support ratings, said during the meeting that the government would use a range of steps including fiscal and tax measures to carry out the package.
The government will implement the package step by step, with some measures expected to be carried out beyond the current fiscal year ending in March, Yosano said. The government previously compiled a 215 billion yen ($1.96 billion) relief package last December to tackle rising oil prices.
That spending came under both the extra budget for last fiscal year that ended in March and the current year's budget. It also compiled additional plans in June, including footing part of the fuel bills for fishermen, funded by money already set aside for the December package.