Japan May Announce $51 Billion Stimulus, Delay Election Timing

Japan May Announce $51 Billion Stimulus, Delay Election Timing


Oct. 30 (Bloomberg) -- Japan's Prime Minister Taro Aso is set to announce a second stimulus package for the world's second- largest economy today, putting election plans on hold as his government's popularity slumps.

Aso, 68, will probably unveil a 5 trillion yen ($51 billion) plan that includes financial assistance for families and tax relief on home loans, the Yomiuri and Asahi newspapers reported, without saying where they obtained the information. The government will submit a supplementary budget to finance the measures, the Yomiuri said.

Japan's Finance Ministry yesterday cut its economic assessment in all of the nation's 11 regions for the first time in a decade as the global financial crisis slowed overseas demand and consumer spending. Slumping economic growth has forced Aso to reconsider plans to call elections that would risk ending his party's more than 50-year grip on power.

``These are more election measures than economic measures,'' said Kazutaka Kirishima, an economics professor at Josai University northwest of Tokyo. ``Aso has had to keep delaying the contest because of surveys predicting the ruling Liberal Democratic Party will lose.''

The LDP's own internal poll predicted such an outcome for a lower house election held now, the Nikkei newspaper said today. The opposition Democratic Party of Japan would take more than 240 of 480 seats, the newspaper said, without saying how it obtained the poll.

``Regardless of whether there will be an election or not I will do a campaign tour of Japan,'' Aso told reporters today.

Approval Rating

Approval for Aso's Cabinet fell 9 percentage points to 36 percent in a Mainichi newspaper survey published Oct. 20 while the disapproval rating rose 15 points from last month to 41 percent. When asked which party the respondents want to win in the next elections, 48 percent chose the DPJ compared with 36 percent who favored the LDP. The paper didn't provide a margin of error.

Aso had intended to ``ask the public's will'' and call an election at the start of the parliamentary session that began Sept. 24, he wrote in an article in the Bungei Shunju magazine published this month. Yomiuri reported in September that Aso had targeted a date as early as Oct. 26.

The premier backtracked earlier this month, saying he intended to prioritize ``economic measures'' over dissolving the lower house. Parliament approved a 1.8 trillion yen supplementary budget to fund the first stimulus package on Oct. 16.

Households, Companies

Aso is set to disclose the new measures at a 6 p.m. Tokyo press briefing. The plan is tailored to help households and small and mid-sized companies because consumer sentiment is at the lowest level on record. Confidence among Japan's small and medium-sized companies has dropped to a decade low, the Shoko Chukin Bank reported yesterday.

The yen rose to a 13-year high last week, eroding the value of the nation's exports. Japan's benchmark Nikkei 225 Stock Average has fallen 42 percent this year and slumped to the lowest level in 26 years this week, on concern the global economy will enter a recession and crimp world trade.

Squeezed company earnings are likely to cause tax revenue to ``fall significantly,'' Vice Finance Minister Kazuyuki Sugimoto said this month. The government is bidding to balance the budget by 2011. Economic and Fiscal Policy Minister Kaoru Yosano has said Japan should maintain that target although it's becoming more difficult as the economy slows.

Aso's spending choices are constrained because the nation's public debt, at about 180 percent of gross domestic product, is the highest among industrialized nations.

``Japan is limited in what it can do. The U.S. is like a giant elephant in comparison,'' said Masaaki Kanno, chief economist at JPMorgan Chase & Co. in Tokyo. ``In the end, the economy will just have to wait for the U.S. to recover, while being careful not to get trampled underfoot.''

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