On Wednesday, Prime Minster Taro Aso, in his opening address to the 171st session of the Diet, stated that “the present crisis demonstrates the limitations of the structures now in place now that our economy has globalised to an extent far beyond expectations.” However, Prime Minister Aso noted that the present financial crisis provided an opportunity for Japan to “contribute actively the creation of new rules for the global economy.” Using the example of Japan’s commitment last November to lend make a $2 billion investment in the one of the World Bank’s funds and a $100 billion loan to the International Monetary Fund, he reiterated that countries around the world must collaborate on multiple levels to address the crisis.
Thus far, the “total scale of the economic measures” the Japanese government has adopted to counteract the crisis equal approximately 75 trillion yen” (approximately $835 billion). Prime Minister Aso also stated that the “total of fiscal spending and reduced taxes” by year end would amount to 12 trillion yen” ($134 billion) or almost 2 percent of Japan’s GDP. The Japanese government in formulating its fiscal policies intends among other measures to adopt the following initiatives in order to stimulate the economy:
- commit 400 billion yen ($4.5 billion) to establishing a fund to create new jobs;
- implement tax cuts on a scale of one trillion yen ($11.1 billion); and
- continue efforts to deliver assistance to small and medium enterprises by providing assistance in the form of emergency credit guarantees and special loans.
As reported earlier this week, the Ministry of Economy, Trade and Industry has issued a statement that it is considering providing public aid to companies affected by the financial crisis with the assistance of the Development Bank of Japan and other state-owned institutions. While the details of the potential monetary arrangements remain unclear, its seems that aid will be provided to companies that agree to accept a number of terms and conditions including a requirement to provide a business plan of how it intends to improve its company earnings over the next three years.
Finally, the IMF, in a survey it released this week, projects a 2½ percent contraction in the Japanese economy this year.