Financial Japan stimulus to inject $60bn into flagging economy

Japan stimulus to inject $60bn into flagging economy
The Japanese cabinet has approved a plan to pump more than $60bn (£38bn) into the country's struggling economy.

The Japanese prime minister faces seemingly unsolvable economic problems
The aim of the plan - which still needs approval from parliament - is to boost growth, jobs and spending.

The Japanese economy is suffering from deflation and a strong currency; prices keep falling, but consumers hold off spending in hope of lower prices.

Analysts said the key problem is that the yen is at a 15-year high, making exports more expensive.

Earlier this week, the Bank of Japan set interest rates at just above zero.

Japan's Nikkei newspaper said the plan could boost GDP growth by up to 0.6% and help to save jobs.

Yen dollar doldrums
An extra budget is needed from parliament to fund the stimulus plan. This is expected to be submitted to parliament for debate later this month.

A previous stimulus package, announced last month, was intended to create about 200,000 jobs and shift GDP into positive territory, but was criticised as not going far enough.

Continue reading the main story
JAPANESE YEN V US DOLLAR
LAST UPDATED AT 08 OCT 2010, 12:36 GMT

¥1 buys change %
0.0122
0.00
0.00
More data on this currency pair
At the heart of Japan's woes is the strong yen, which has gained almost 50% in value against the dollar since mid-2007.

Japan has been stuck for the last 20 years in what economists call a "liquidity trap" - falling prices, interest rates stuck at zero, but savings rates remaining stubbornly high.

Much of the recent yen strength is actually to do with dollar weakness - the US has also cut rates virtually to zero and faces the risk of sinking into a liquidity trap just like Japan.

Despite the additional spending measures in the supplementary budget, Mr Kan has made clear that Japan must cut its budget deficit in the medium term.

Japanese government debt has risen to about twice the size of its economy during the last two decades of poor growth.
Coppied by http://www.bbc.co.uk/news/world-asia-pacific-11498607

party powerbroker Ichiro Ozawa Japan DPJ Ozawa to bid for PM in party vote - media

Japan DPJ Ozawa to bid for PM in party vote - media
TOKYO (Reuters) - Japanese ruling party powerbroker Ichiro Ozawa will run in a party leadership vote on Sept. 14 in a challenge to Prime Minister Naoto Kan, Kyodo news agency and other Japanese media said on Thursday.

His candidacy risks a bitter battle within the ruling Democratic Party of Japan (DPJ) as it tries to deal with a soaring yen and a fragile economic recovery.

Japan's ruling Democratic Party former secretary general Ichiro Ozawa delivers a speech at a political seminar in Tokyo August 25, 2010. Japanese ruling party powerbroker Ichiro Ozawa will run in a party leadership vote on Sept. 14 in a challenge to Prime Minister Naoto Kan. (REUTERS/Yuriko Nakao)
The head of the DPJ will be the prime minister by virtue of the party's majority in the parliament's powerful lower house.

Veteran lawmaker Ozawa, who stepped down last year as party leader after a political funding scandal, has been an outspoken critic of Kan's decision to float the idea of a future sales tax hike ahead of a July upper house election, which the party lost.
Coppied by http://thestar.com.my/news/story.asp?file=/2010/8/26/worldupdates/2010-08-26T051804Z_01_NOOTR_RTRMDNC_0_-510699-1&sec=Worldupdates

Watched beng this China Passes Japan as Second-Largest Economy

Enjoy China Passes Japan as Second-Largest Economy
SHANGHAI — After three decades of spectacular growth, China passed Japan in the second quarter to become the world’s second-largest economy behind the United States, according to government figures released early Monday.
Multimedia

The Takeaway: David Barboza on the Chinese Economy

Related

Workers Let Go by China’s Banks Are Putting Up a Fight (August 16, 2010)
Readers' Comments
Share your thoughts.
Post a Comment »
Read All Comments (79) »
The milestone, though anticipated for some time, is the most striking evidence yet that China’s ascendance is for real and that the rest of the world will have to reckon with a new economic superpower.

The recognition came early Monday, when Tokyo said that Japan’s economy was valued at about $1.28 trillion in the second quarter, slightly below China’s $1.33 trillion. Japan’s economy grew 0.4 percent in the quarter, Tokyo said, substantially less than forecast. That weakness suggests that China’s economy will race past Japan’s for the full year.

Experts say unseating Japan — and in recent years passing Germany, France and Great Britain — underscores China’s growing clout and bolsters forecasts that China will pass the United States as the world’s biggest economy as early as 2030. America’s gross domestic product was about $14 trillion in 2009.

“This has enormous significance,” said Nicholas R. Lardy, an economist at the Peterson Institute for International Economics. “It reconfirms what’s been happening for the better part of a decade: China has been eclipsing Japan economically. For everyone in China’s region, they’re now the biggest trading partner rather than the U.S. or Japan.”

For Japan, whose economy has been stagnating for more than a decade, the figures reflect a decline in economic and political power. Japan has had the world’s second-largest economy for much of the last four decades, according to the World Bank. And during the 1980s, there was even talk about Japan’s economy some day overtaking that of the United States.

But while Japan’s economy is mature and its population quickly aging, China is in the throes of urbanization and is far from developed, analysts say, meaning it has a much lower standard of living, as well as a lot more room to grow. Just five years ago, China’s gross domestic product was about $2.3 trillion, about half of Japan’s.

This country has roughly the same land mass as the United States, but it is burdened with a fifth of the world’s population and insufficient resources.

Its per capita income is more on a par with those of impoverished nations like Algeria, El Salvador and Albania — which, along with China, are close to $3,600 — than that of the United States, where it is about $46,000.

Yet there is little disputing that under the direction of the Communist Party, China has begun to reshape the way the global economy functions by virtue of its growing dominance of trade, its huge hoard of foreign exchange reserves and United States government debt and its voracious appetite for oil, coal, iron ore and other natural resources.

China is already a major driver of global growth. The country’s leaders have grown more confident on the international stage and have begun to assert greater influence in Asia, Africa and Latin America, with things like special trade agreements and multibillion dollar resource deals.

“They’re exerting a lot of influence on the global economy and becoming dominant in Asia,” said Eswar S. Prasad, a professor of trade policy at Cornell and former head of the International Monetary Fund’s China division. “A lot of other economies in the region are essentially riding on China’s coat tails, and this is remarkable for an economy with a low per capita income.”
coppied by http://www.nytimes.com/2010/08/16/business/global/16yuan.html