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TOKYO: Japan's Finance Minister Hirohisa Fujii on Monday back-pedalled on his earlier support for a strong yen.
But he reiterated his opposition to intervening in the market to weaken the currency to help the nation's recession-hit exporters.
The Japanese currency has strengthened to an eight-month high against the US dollar, hurting export-driven companies and causing the Nikkei to slip below the 10,000-level.
Channel NewsAsia looks at how the new Hatoyama government is likely to address this and other economic issues.
Prime Minister Yukio Hatoyama and his coalition partners have decided to start work on the fiscal year 2010 budget from scratch, abandoning what had earlier been put in place by the previous Taro Aso government.
Mr Hatoyama had earlier ordered a freeze to the supplementary budget that has been approved by his predecessor. And he told his cabinet ministers to examine how far it has been implemented, identify possible areas to cut and report to him by October 2.
The stimulus package was the largest ever, worth 14.7 trillion yen, or about 162 billion dollars. The breakdown - 3 trillion yen to support small and medium sized firms to procure funds; 1.3 trillion to support those out of jobs, and also to finance regional hospitals and to encourage the people to purchase eco-friendly cars.
The new government hopes to extract 4 trillion yen from there to finance all education for children until they finish compulsory education. And it expects it will need 7.1 trillion yen for fiscal year 2010.
Richard Jerram, chief economist at Macquaries Capital Securities Japan, said: "I think it's somewhat contradictory to G20 telling the world to stimulate demand and get the economy going and trying to reduce global imbalance.
"And of course the stimulus budget of the previous government was a big part of that. Then they say cut away from some spending. It's quite difficult to achieve both objectives with these sort of cuts."
These efforts are part of the earlier manifesto promises which include free expressway toll fees and raising the minimum amount of pension that can be received.
Critics have expressed concern as to the impact on Japan's already snowballing national deficit of over 800 trillion yen.
Financial Services Minister Shizuka Kamei, leader of the coalition People's New Party, has also alarmed banks by stating he will pass a bill to give small- and medium-sized firms three years to repay loans.
Jerram added: "He's talking about banks performing a social, almost moral function, rather than purely seeking a profit objective. There's no room for Adam Smith's invisible hand in that type of logic. So people are worried about the socialist type of drift to some of the policy statements."
Analysts have already expressed doubts the Hatoyama government will be able to keep Japan's economy on a growth track. And this could lead to domestic and international pressure. - CNA/de
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