Will Aso's new economic plan work?

Japanese Prime Minister Taro Aso's Cabinet recently launched a new economic initiative, a so-called "Aso edition of the Neo-Keynesian Economics", in an effort to pull the world's second largest economy out of its worst recession since the end of World War II.

The economic initiative aims to focus Japan's attention on Asian markets and cultivate some new industries to maintain Tokyo's sharp edge in an increasing competitive global market.

Since the outbreak of the global financial crisis, Japan has worked out some stimulus packages, with a total of 75 trillion yen ($754 billion). On April 10, the Japanese government once again took another countermeasure, involving a wide range of stimulus spending to boost its economic recovery. The plan, approved by Aso's Cabinet has been submitted to parliament for approval.

In the latest package, the Aso Cabinet plans to spend 15.4 trillion yen, including tax cuts, subsidies and financial assistance for enterprises, which is expected to bring the scale of the Japanese government's stimulus packages to a total of 56 trillion yen, the biggest in the history of the country.

Different from the previous packages, which mainly focused on construction projects, the latest plan aims to boost Japan's new energy, medical care and sanitation, as well as develop its soft infrastructures.

A series of impending questions now confront the Aso government - how to continue carrying out an expansive fiscal policy, how to ease growing pressures from the US and the International Monetary Fund (IMF).

What also remains a top concern for the Japanese government is to reinforce the position of the ruling Liberal Democratic Party (LDP) in the face of strengthened political offensives from the opposing Democratic Party of Japan before the upcoming election.

The Aso Cabinet has mobilized and absorbed available political wisdoms nationwide and prescribed a long-term economic formula in an attempt to help the Japanese economy survive the recession.

An expanded financial policy has been embraced to boost Japan's new industries to ensure their competitiveness in the global market. The Aso administration also plans to take effective measures to rebuild the Asian market so that it can reduce economic risks brought by its excessive economic dependence on the US.

In addition, necessary measures have been taken to expand the country's employment in the hope of boosting the LDP's reputation. Obviously, Aso's Cabinet based its economic and political strategies on a long-term perspective.

Aso expects to build a low-carbon society through a technological revolution. He also plans to improve the country's soft infrastructure construction by conducting a series of medical care and health reforms.

Besides, other moves, such as recycling Japan's arable land, simplifying its entry and exit procedures, boosting network-focused software sectors and developing solar industry, will also be undertaken to expand the country's social demands and create employment.

To build a low-carbon society, the Aso administration will offer its support to the development of energy-conservative and environment-friendly sectors. For example, it plans to extend subsidies to families buying energy-efficient vehicles and home appliances, and to install solar equipment for middle and primary public schools.

To develop a healthy society, the Aso government also plans to extend financial support to the establishment of a non-governmental training mechanism for medical and nursing staff and raise their salaries.

With the extensive use of the Internet, cable broadband and fourth-generation telephone technology, e-administration, e-commerce and network cultural sectors have been rapidly flourishing in Japan in recent years.

The country's animation, garment designing industries, and other soft sectors have prospered. To expedite their development, the government has offered policy support for the establishment of a non-government fund to develop a network of cultures, which will help cultivate new export sectors.

To reduce possible economic risks brought by excessive economic dealings with the US, the Aso administration worked out an Asian economic development initiative on April 11, calling on China, South Korea, Australia, New Zealand and the Association of Southeast Asian Nations (ASEAN) members to jointly lay down a comprehensive plan. Its purpose is mainly to merge the regional infrastructure and logistics system, tap its potential to build a Pan-Asian demand market, and try to double the region's gross domestic product to $24 trillion yuan by 2020.

However, Aso's latest economic initiative has not gone down too well in the market.

It is believed the policy stresses excessively on a long-term strategy and election tactics, instead of addressing necessary measures to tackle the financial crisis.

It still remains unknown whether the latest stimulus package can produce positive economic results.

The author is a researcher with the Institute of International Studies under Tsinghua University.

(China Daily 05/07/2009 page9)