The Japanese government on Tuesday approved a stimulus package worth 5.090 trillion yen aimed at curbing the rise of the yen and combating deflation. The government in Tokyo seeks to boost domestic demand, improve the business environment, and revive regional economies with the help of the package, which includes public works projects.
The government still needs to gain parliamentary support for the amount of 4.430 trillion yen intended to cover most of the costs of the stimulus through an additional budget for the fiscal year ending in March 2011. The issuance of new government bonds for the additional budget is not expected. The decline in prices poses the greatest headaches for Japan, indicating persistent deflationary pressures in the country. The yen reached a new 15-year high against the dollar on Monday at 80.41 yen. In mid-September, the yen’s surge to a 15-year high forced the central bank to intervene in the markets for the first time in six years by selling the domestic currency. A strong yen negatively impacts Japanese exports as it reduces the competitiveness of Japanese products in foreign markets and diminishes revenues earned abroad when repatriated to the country. (H)
