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10 Apr, 2009 14:45

Japan turns to the public purse again as prospect of recession mounts

The Japanese Prime Minister unveiled a new stimulus package on Friday. In an attempt to keep the worlds second largest economy from sliding further into recession, he wants to outlay a further $150 billion.

Japan – home to the second largest world economy. The world financial crisis has brought the country its sharpest economic downturn since World War II.

Now Prime Minister, Taro Aso, has unveiled a 15 trillion yen (circa $150 billion) stimulus package, in the hope of creating 2 million jobs over the next three years..

"Our priority is to prevent the economy falling apart. We also need to limit the impact by protecting people's livelihoods and foster future growth. To tackle these objectives we are launching the biggest economic package in history of 15 trillion yen, equivalent of about 3 per cent of Japan's gross domestic product."

The package comes in addition to 12 trillion yen from two previous stimulus packages. It includes funding for employment, health and child care and even low carbon technology.

Mark Rubenstein, Senior Analyst, Metropol says the rest of the world can benefit if the measures lead to recovery.

“Any spending directed at boosting growth is important not only for the Japanese economy, but for the world economy.”

At the moment, Japan's public debt runs at 170% of its GDP – the highest level among industrialised economies. But as the one nation with hardened experience of fighting a deflationary recession, and with exports collapsing, its time to turn to the public purse again.