MercoPress. South Atlantic News Agency

Japan announces third stimulus plan …and more if needed

Aso: Japan faces worst recession since WW2

Japan announced Thursday a record 150 billion US dollars stimulus package as it seeks to revive its flagging economy. Prime Minister Taro Aso announced the package, worth about 3% of its gross domestic product, in Tokyo after the ruling party approved the measures.

The 15.4tn yen package, to be formally unveiled on Friday, includes measures to boost fuel-efficient vehicles and consumer electronics. Shares in Tokyo gained as details of the stimulus plan were announced.

“Only countries that can turn a challenge into an opportunity can prosper in the future,” Mr Aso said. The stimulus plan the government third in the past year, is bigger than many analysts had expected.

It also creates a financial safety net for temporary workers, boost struggling firms and support regional economies. Earlier in the week, Finance Minister Kaoru Yosano had suggested that the stimulus would be more like 2% of GDP.

Mr Aso had previously said he would not hesitate to issue new government bonds to cover the cost of the proposed steps.

The country is going through its worst recession since World War II as the global financial downturn sapped demand for its exports.

Japan's benchmark Nikkei 225 index closed at a three-month high, rising 3.74% to finish at 8,916.06. Shares in carmakers and solar power-related firms gained after details of the draft plan were released.

“This may contribute to GDP for a year,” said Masamichi Adachi, an economist at JP Morgan. “The consequences over the longer term are negative as we are piling up more of a fiscal burden. Bond issuance will go up from here on.”

The package came out as figures showed Japan's machinery orders unexpectedly rose in February thanks to gains in the services sector.