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Japan plans new stimulus, jobless rate at 3-yr high

(Agencies)
Updated: 2009-03-31 17:38

TOKYO -- Japanese Prime Minister Taro Aso is expected to unveil a new stimulus package on Tuesday to create jobs and spur demand as unemployment climbed to a three-year high and household spending fell for the 12th month in a row.

A cat is seen in front of a homeless man (3rd R) taking a nap at a park in Tokyo March 31, 2009. Japanese unemployment rose to a three-year high in February as a deepening recession put more people out of work. [Agencies]

Aso, who has been faring badly in opinion polls, is expected to map out a plan to create 2 million jobs over three years, as layoffs threaten to sweep from the ailing export sector into the small businesses that provide most of Japan's jobs.

The plan is part of a broader package Aso hopes to finalise by mid-April to bolster earlier stimulus measures, a senior ruling party lawmaker told reporters. The government may issue bonds to finance the fresh spending.

Aso has not discussed the size of the package with ruling coalition lawmakers, the politician said, but some ruling party members are calling for an extra budget of more than 10 trillion yen ($102.5 billion), the Asahi Shimbun newspaper reported.

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Aso will outline the plans at a news conference at 5 pm (0800 GMT), ahead of a gathering of G20 rich and developing countries this week at which the need for more spending is expected to be a highly divisive issue among major powers.

But many analysts say it will be difficult for Japan's government to arrest the jobless trend without a recovery in exports or domestic demand.

Japan's unemployment rate rose to a seasonally adjusted 4.4 percent in February from 4.1 percent in January, data showed on Tuesday, higher than a median market forecast of 4.3 percent.

Household spending slid 3.5 percent in February from a year earlier, while available new jobs sank to a six-year low, suggesting weak domestic consumption is an increasing drag on the economy even as exports slide amid the global slowdown.

"Japan's economy is likely to have hit bottom in the first quarter of this year," said Junko Nishioka, chief Japan economist at Royal Bank of Scotland.

"In usual times, it would then start to pick up, but now we can't expect that to happen. That means companies won't be able to raise cash flow and therefore will continue to cut jobs."

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