By Sachiko Sakamaki
Dec. 12 (Bloomberg) -- Taro Aso announced the second stimulus package since he became Japan’s prime minister in September, a bid to reverse a plunging approval rating ahead of elections.
Japan will allocate 10 trillion yen ($110 billion) to buoy the world’s second-largest economy, an amount that includes 6 trillion yen already announced in October, the government said in a statement distributed to reporters in Tokyo. Aso hasn’t yet submitted a bill to parliament to fund the October measures.
“This is a desperate attempt by Aso to recover support,” said Minoru Morita, an independent political analyst and author of a book on Japan’s ruling Liberal Democratic Party. “He’s falling deeper into a quagmire by announcing various measures that aren’t backed up by budgets.”
Aso, 68, has come under increasing pressure to address a deepening recession as companies such as Toyota Motor Corp. and Sony Corp. fire thousands of workers. Gross domestic product contracted at an annual 1.8 percent pace in the third quarter and the yen climbed to 88.58 versus the dollar today, the strongest since 1995, eroding the value of the country’s exports.
Support for Aso’s Cabinet has fallen by more than half since he took office, to 20.9 percent in a Yomiuri newspaper poll published Dec. 8. Aso promised to prioritize growth over balancing the budget during his campaign.
Worker Housing
The government will devote 1 trillion yen to aid unemployed workers, including housing assistance, according to the statement.
“The government wants to ease the public’s anxiety and take measures to end the recession earlier than other industrialized nations,” Aso said in a speech on NHK television.
Japan’s Finance Minister Shoichi Nakagawa said today that employment conditions are becoming “severe.”
The 10 trillion yen allocation includes about 3 trillion yen in fresh spending that needs to be financed by the budget for next fiscal year, according to the Ministry of Finance.
LDP members such as Sadakazu Tanigaki, finance minister from 2003 to 2005, have pressured Aso to boost government spending to prevent the nation’s first recession in seven years from deepening. Japan isn’t in a position to “keep cutting spending,” Tanigaki, 63, said yesterday.
In October Aso promised to pump 5 trillion yen into the economy to help households and small businesses. Aso said last month he wouldn’t submit the extra budget required to fund the package until January.
The additional package announced today “may help slow the pace of a worsening economy but it doesn’t have enough power to buoy the economy,” said Mamoru Yamazaki, chief Japan economist at RBS Securities Japan Ltd. in Tokyo.
Split Apart
The LDP may split apart before elections required by September 2009 because lawmakers don’t believe victory is possible under Aso, said Kenji Eda, an independent lower house lawmaker and visiting professor at Toin University of Yokohama.
Lawmakers such as former LDP Secretary-General Hidenao Nakagawa and former candidate for prime minister Yuriko Koike are already forming splinter groups that may become political parties, Eda said.
More than 50 lawmakers attended a meeting yesterday called by Nakagawa, who said the public wants a “sweeping political change” on a talk show broadcast on Fuji Television Dec. 7.
“Aso’s lack of leadership and public support has turned differences into deep rifts within the party,” said Jin Igarashi, a political science professor at Hosei University in Tokyo. “The mice have begun to flee the sinking ship.”
Aso’s predecessor, Yasuo Fukuda, said he would resign Sept. 1, the same day a Nikkei newspaper poll showed his public approval rating fell 9 percentage points to 29 percent despite a 1.8 trillion yen stimulus package he announced Aug. 29.
To contact the reporter on this story: Sachiko Sakamaki in Tokyo at Ssakamaki1@bloomberg.net
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