Japan Announces New Economic Stimulus Package

Japanese Prime Minister Taro Aso on Friday announced a new stimulus package to shore up his country's economy, with measures to spur employment, encourage lending and inject capital into financial markets.

"The global downturn is said to be a recession on a scale that comes once in a century," Aso said.

The new package includes 10 trillion yen ($111 billion) in tax breaks and public financing, and 13 trillion yen ($144 billion) to prop up financial markets, he said in a nationally televised news conference.

It comes after a 27 trillion yen stimulus package announced in October, which included expanded credits for small businesses and a cash payout to every household to spur spending.

"Since then the economy has worsened beyond our expectations," Aso said.

He pointed to falling stocks and the surging yen, and said measures were needed to boost employment and stabilize Japan's economic system.

Aso said the newest package would provide support including tax breaks for workers affected by the economic slowdown and home buyers, as well as funds for injection into markets and support for mid-sized businesses.

Earlier, before his announcement, the yen surged to a 13-year high against the dollar. The U.S. currency sank to 88.16 yen in afternoon trading in Tokyo, its lowest level since Aug. 2, 1995.

Japanese stocks plunged as the yen surged; the benchmark Nikkei 225 stock average slid 5.6 percent to 8,235.87.

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Japanese Flag

A strong yen is especially painful for Japan's export-driven economy as it cuts into profits made abroad, even as slowing demand drags down sales.

Many of Japan's big-name companies have announced job cuts and slashed production in recent days.

Earlier this week, Sony said it will slash 4 percent of its global work force, cut spending and shut plants. The cuts include 8,000 of its 185,000 full-time workers, another 8,000 temporary jobs, and the closing of five or six plants.

Toyota has announced several production cutbacks in the last month in Japan and North America, as well as plans to cut several hundred contract workers.