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Japan Announces Stimulus of $11 Billion

The cabinet announced it would be tapping reserve funds for the $10.7 billion for a variety of different measures

December 1, 2012 – A new round of stimulus, the second approved by the Japanese government was announced today. The latest package is the second in just over a month, as Yoshihiko Noda the prime minister attempts to boost the slumping economy in the run up to the elections in December. The cabinet announced it would be tapping reserve funds for the $10.7 billion for a variety of different measures. Included is the rebuilding of areas destroyed by the 2011 earthquake, aid for small businesses that are cash strapped and overall employment support.

The plan is approximately double the amount of the previous package that was announced in October, which was taken from reserves and directed at reconstruction.

The new stimulus arrives at a time when Japan is hovering on the brink of a recession, its fifth over the past 15 years, as production has been cut by manufacturers amid worsening in sales and bad profit outlooks. A drop in exports was the main contributor of the shrinkage of 0.9% in the gross domestic product for the country from July to September.

Last week, the quarterly assessment of sentiment for business was slashed by the government in the 11 regions in the country. That was the first time every region was slashed since early 2009. Sluggish consumption creating slow output was to blame.

On Friday, new economic data was released that was a bit more encouraging and showed a rise of 1.8% for industrial production during both September and October, which was unexpected. The consumer price index for the nation was not changed from last year during the same period.

Nevertheless, with additional job cuts expected for the manufacturing sector due to tepid demand from developed economies and the outlook for China being uncertain, analysts have said they expect more deflationary pressure to be applied to the Japanese economy, the third largest in the world.

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