By Tetsushi Kajimoto
TOKYO, Dec 8 (Reuters) – Japan’s government agreed on a $81 billion stimulus package on Tuesday, aimed at preventing the economy from tipping back into recession as deflation persists and a strong yen threatens exports.
Economists said the 7.2 trillion yen plan, equal to about 1.5 percent of gross domestic product, would not provide a significant lift to an economy dependent on overseas demand for machinery, electronics and cars.
While several other economies are already debating phasing out economic stimulus deployed to fight the financial crisis, Japan continues to struggle amid chronically weak consumer demand and falling prices.
The budget underscores the balancing act faced by Prime Minister Yukio Hatoyama and his Democratic Party. The Democrats are keen to avoid a recession ahead of an upper-house election next year but are also under pressure to make good on their pledge of fiscal discipline as the country’s public debt nears 200 percent of GDP, by far the worst among G7 nations.
“This may help the economy somewhat,” said Yasunari Ueno, chief market economist at Mizuho Securities. “But it doesn’t even begin to address the more fundamental issues facing Japan, such as weaknesses in the global economy and deflation.”