TOKYO (AP) — Japan's Cabinet on Friday approved 5.05 trillion yen ($61 billion) in new economic stimulus, the latest in a string of measures to shore up the country's lethargic economy amid a battering from the strong yen.
The plan also called for funding to secure rare earths needed for Japan's advanced manufacturing after China last month imposed a de facto export ban on the minerals amid a territorial dispute between the two Asian giants.
Prime Minister Naoto Kan's new package aims to boost Japan's gross domestic product by 0.6 percentage points, create or save up to 500,000 jobs and take other steps to help small and medium sized businesses.
It comes just days after the central bank cut its key interest rate to virtually zero. Last month, the Bank of Japan also intervened in the currency market in what appears to have been a fruitless attempt to rein in the strong yen — which hit another 15–year high against the dollar this week.
Exports are down, factory output is falling and Japan continues to struggle with deflation, a situation in which falling prices can drag on corporate profits, paychecks and the overall economy. The yen's spike, meanwhile, erodes overseas earnings for major exporters like Toyota Motor Corp. and Canon (News - Alert) Inc.
Kan, who came to power just four months ago and survived a leadership challenge from within his party in September, has been under heavy political pressure to produce a tangible path to recovery for Japan's economy.
The massive new package, to be submitted this month to parliament for approval, follows 915 billion yen ($11 billion) in measures that Kan's government unveiled last month.
"To implement these economic measures, the fiscal budget is the major issue of the current parliamentary session, and I will devote my full efforts to see that it is passed," Kan told members of parliament Friday morning.
The latest plan also aims to support regional economies that have been hit hard by the downturn and calls for ongoing support for programs aimed at raising sales of environmentally friendly products like energy–efficient fridges and airconditioners to consumers.
The package is part of a supplementary budget for the current fiscal year through March 2011. With Japan carrying a massive public debt, the ruling Democrats have said they will not issue new bonds to finance the measures.
As for rare earth materials, Kan urged Japan to take steps to diversify its sourcing of the resources, including acquiring mines and strengthening ties with foreign countries that possess such minerals.
China denied that it was halting exports, but Japanese trading firms said shipments had virtually stopped since around Sept. 21, held up at Chinese ports by increased paperwork and inspections. That came after Japan arrested a Chinese fishing boat captain whose trawler collided with two Japanese patrol boats off disputed islands in the East China Sea.