Japan Plans More Stimulus, Jobless Rate Hits 3-Year High

Japanese Prime Minister Taro Aso said on Tuesday he planned to submit an extra budget to fund a new stimulus package but was mum on how much the government would spend to shore up an economy in recession.

Greg Baker / AP

Aso, who has been faring badly in opinion polls, said the government and ruling parties would finalize by mid-April a package of steps to create jobs and spur demand as unemployment climbed to a three-year high and household spending fell for the 12th month in a row.

"We aim to compile bold measures without being fixated on past experiences," Aso told reporters ahead of a gathering of G20 rich and developing countries this week at which the need for more spending is expected to be a highly divisive issue among major powers.

Market players were hardly inspired as Aso offered few details of the planned package, which many believe would be not be enough to arrest the jobless trend without a recovery in exports.

"It seems to me basically like lip-service," said Tomomi Yamashita, fund manager at Shinkin Asset Management. "Japan still can't really relax. Fundamentally, it's not a country that can stage an economic recovery all on its own, given its dependence on exports."

The planned package, which would be the third since the current economic downturn, will likely aim to create 2 million jobs over three years, as layoffs threaten to sweep from the ailing export sector into the small businesses that provide most of Japan's jobs.

Aso did not reveal the size of the package but some ruling party members are calling for an extra budget of more than 10 trillion yen ($102.5 billion) for the fiscal year beginning on Wednesday, the Asahi Shimbun newspaper reported.

A senior ruling party lawmaker quoted Aso as saying the government may issue deficit-covering bonds to finance it.

Strong Rebound Unlikely

Japan's unemployment rate rose to a seasonally adjusted 4.4 percent in February from 4.1 percent in January, data showed on Tuesday, higher than a median market forecast of 4.3 percent.

Household spending slid 3.5 percent in February from a year earlier, while available new jobs sank to a six-year low, suggesting weak domestic consumption is an increasing drag on the economy even as exports slide amid the orders from their suppliers.

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Japan's jobless rate is still lower than in the United States and the eurozone, but is the highest since early 2006.

Analysts expect Japan's economy to keep shrinking in the first half of the year after contracting 3.2 percent in the fourth quarter, its fastest decline since the 1974 oil crisis and twice as fast as the U.S. and euro zone.

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