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Japanese government approves $116bn stimulus package Japanese government approves $116bn stimulus package
(about 3 hours later)
The Japanese government has approved a fresh 10.3 trillion yen ($116bn; £72bn) stimulus package in an attempt to spur a revival in its economy.The Japanese government has approved a fresh 10.3 trillion yen ($116bn; £72bn) stimulus package in an attempt to spur a revival in its economy.
The package will include infrastructure spending, as well as incentives for businesses to boost investment.The package will include infrastructure spending, as well as incentives for businesses to boost investment.
The government said the stimulus is likely to boost Japan's gross domestic product by two percentage points. The government estimated that the stimulus would boost Japan's economic growth by 2% and create 600,000 jobs.
Japan's economy has been hurt by a dip in exports amid slowing global demand and subdued domestic consumption.Japan's economy has been hurt by a dip in exports amid slowing global demand and subdued domestic consumption.
The world's third-largest economy is currently in a recession, having contracted for two quarters in a row.The world's third-largest economy is currently in a recession, having contracted for two quarters in a row.
"Unfortunately, the previous administration failed to work out how to boost growth and expand the economic pie," Prime Minister Shinzo Abe said."Unfortunately, the previous administration failed to work out how to boost growth and expand the economic pie," Prime Minister Shinzo Abe said.
"It is vital that we have an economic strategy that can create jobs and raise incomes to sustain growth.""It is vital that we have an economic strategy that can create jobs and raise incomes to sustain growth."
'Seriously committed' Included in the spending package are plans to rebuild areas devastated by the earthquake and tsunami of 2011, support for regional economies, and more investment in education and social security.
Mr Abe, who took office in December, has promised to take aggressive measures to help put the economy back on a growth track.Mr Abe, who took office in December, has promised to take aggressive measures to help put the economy back on a growth track.
He has called upon Japan's central bank, the Bank of Japan (BOJ) to implement measures, including doubling its inflation target to 2% to help revive growth.
The government reiterated his stance, saying said that it is looking to "build a framework for strengthening cooperation" with the central bank and called on the bank may ease its policies in coming months.
"We strongly expect the BOJ to conduct aggressive monetary easing with a clear price target," it said in statement.
Mr Abe has also promised to take measures to weaken the yen.Mr Abe has also promised to take measures to weaken the yen.
A weaker Japanese currency bodes well for the country's exporters as it makes their goods less expensive to foreign buyers and also helps boost their profits when they repatriate their foreign earnings back home.A weaker Japanese currency bodes well for the country's exporters as it makes their goods less expensive to foreign buyers and also helps boost their profits when they repatriate their foreign earnings back home.
The yen has weakened nearly 12% against the US dollar since November last year on hopes of such moves. It was trading close to 88.97 yen against the US dollar in Asian trade on Friday.The yen has weakened nearly 12% against the US dollar since November last year on hopes of such moves. It was trading close to 88.97 yen against the US dollar in Asian trade on Friday.
The government said that it will continue to keep a watch on the currency's movements and "respond as appropriate".The government said that it will continue to keep a watch on the currency's movements and "respond as appropriate".
Japanese shares rose on the news of the stimulus with the Nikkei 225 index gaining 1.2%.Japanese shares rose on the news of the stimulus with the Nikkei 225 index gaining 1.2%.
"Shinzo Abe is seen seriously committed to making the economy better as he is becoming more detailed," said Kyoya Okazawa, head of global equities at BNP Paribas.
"Investors are feeling it is possible under his government."
Short term measure?
However, some analysts were of the view that the stimulus is a only a short-term solution to Japan's economic issues.However, some analysts were of the view that the stimulus is a only a short-term solution to Japan's economic issues.
They said that while such an big amount of money being injected into the economy was likely to help spur growth, further steps were needed to sustain it in the long run.They said that while such an big amount of money being injected into the economy was likely to help spur growth, further steps were needed to sustain it in the long run.
'Empty coffers'
They said that Japan needed to take steps to help its exporters and also reform key sectors to boost domestic consumption.They said that Japan needed to take steps to help its exporters and also reform key sectors to boost domestic consumption.
"So far what we have seen is measures to kick-start the economy," Martin Schulz of Fujitsu Research Institute told the BBC."So far what we have seen is measures to kick-start the economy," Martin Schulz of Fujitsu Research Institute told the BBC.
"But once the stimulus boost is over, the coffers will be empty again and Japan will have no more money to spend.""But once the stimulus boost is over, the coffers will be empty again and Japan will have no more money to spend."
Japan's exports have been hurt by a slowdown in demand from key markets such as the US, eurozone and China.Japan's exports have been hurt by a slowdown in demand from key markets such as the US, eurozone and China.
While sales to the US and eurozone have been hurt by economic issues in those markets, those to China have been impacted by an ongoing territorial dispute between the two countries.While sales to the US and eurozone have been hurt by economic issues in those markets, those to China have been impacted by an ongoing territorial dispute between the two countries.
China is Japan's biggest trading partner and is also among the fastest growing consumer markets.China is Japan's biggest trading partner and is also among the fastest growing consumer markets.
Mr Schulz said Japan needed to improve its relations with China to help its exporters' sales in the country, not least because demand from the US and eurozone is likely to remain subdued in the near term.Mr Schulz said Japan needed to improve its relations with China to help its exporters' sales in the country, not least because demand from the US and eurozone is likely to remain subdued in the near term.
On the domestic front, Japan needs to ease regulations in key sectors such as construction, healthcare, retail and agriculture to make them more attractive for investors, Mr Schulz added.On the domestic front, Japan needs to ease regulations in key sectors such as construction, healthcare, retail and agriculture to make them more attractive for investors, Mr Schulz added.