Japan spending boost lifts Asian markets

04/09/2009 (6 h 31 m ago)

Increase in the Japan stimulus package from $100bn to $150bn is expected to be approved by the government by the end of the week Japan's plans to increase the size of its stimulus package to 15tn yen (£102bn), focusing on measures to boost the green economy, sent Asian stockmarkets higher this morning. The total is an increase from the £68bn package announced by the prime minister, Taro Aso, on Monday , and is likely to top ¥56tn, including measures such as tax cuts and credit guarantees. The government pledged more loans for hard-pressed small businesses and subsidies for solar panels and environmentally friendly cars. The news sparked a stockmarket rally and sent the benchmark Nikkei index in Tokyo soaring by 3.7% to 8916.06. Shares in Seoul and Taiwan jumped by more than 4%. Shares in Toyota, maker of the Prius hybrid, rose 4.3%, while those of Sharp, the world's second-largest maker of solar cells, surged 10.7%. The measures – equivalent to 3% of the country's GDP – were approved by the ruling Liberal Democratic party's executive council. The proposal is expected to get the green light from the government tomorrow. The prime minister wanted new government spending to exceed 2% of GDP because of "the extent of the fall in Japanese economic output recently, which is larger than other advanced economies, and also given the need for international co-operation to revive the world economy". Japan has slipped further into recession this year as global demand for its cars and electronics has plunged. The package is designed to help contract workers and small businesses with tax cuts and credit guarantees; boost regional economies; expand green technologies, and support elderly care. The government also said it would implement "bold" reforms and direct public and private-sector investment into three areas of focus: creating the world's leading low-carbon society; strengthening nursing and medical services, and boosting tourism and cultural activities, including the arts. It will also encourage the start of mass production of electric cars in three years and boost solar power generation to 20 times the current level of 1.42m kilowatts. The government also plans to subsidise salaries of workers at nursing homes, aiming to create 300,000 jobs in the next three years, to add to the current 1.3m. The stimulus package also includes a car scrappage scheme similar to the "cash for clunkers" programme being debated in the US Congress. Japan, home to several of the world's biggest carmakers, is considering giving ¥250,000 to consumers who trade in a car 13 years or older for a more fuel-efficient model. Such schemes already exist in a dozen European countries and have boosted car sales. Britain's ailing motor industry has called on the government to introduce a similar incentive in this month's budget. Last month, Japan's parliament passed a record ¥88.5tn budget for the new fiscal year, which started on 1 April, including parts of Aso's two previous stimulus packages. Officials have not said where they would find the extra money, though Aso recently said he would turn to issuing bonds if needed. Japan's public debt already stands at 170% of gross domestic product‚ the highest level among industrialised economies. Economics Japan Global recession Economic growth (GDP) Automotive industry Economic policy Toyota guardian.co.uk © Guardian News & Media Limited 2009 | Use of this content is subject to our Terms & Conditions | More Feeds

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