Recession-hit Japan today unveiled its largest-ever stimulus package of $150 billion to turn around the world's second largest economy.
The 15.4 trillion yen package, the largest-ever size for a single extra budget, equivalent to nearly 3 per cent of Japan's GDP, is aimed to ward off further economic deterioration, protect people's livelihoods and foster future growth, Prime Minister Taro Aso said.
In a nationally televised speech, Aso said the fresh measures were intended to "avert a freefall of the economy at all costs, secure jobs and alleviate people's pains, and boost Japan's future growth".
It is also part of the global effort to spur a broad economic recovery, he said.
Japan has been hit hard by the global financial slump. The country's GDP shrank an alarming annual rate of 12.1 per cent in the October-December quarter.
Although Japanese banks were spared the brunt of the credit crisis, the drop in exports to the United States has sent the country into its worst recession since World War II.
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The total size of the economy-boosting measures, which include tax cuts and credit guarantees to embattled businesses, will reach 56.8 trillion yen, also the largest ever, Kyodo news agency reported.
Under this, the government will offer support for the jobless and small businesses. It also calls for a government- affiliated entity to buy stocks directly from the market to stem steep declines in share prices.
To foster growth, Japan will invest in the environment, Aso said.
Part of the proposal includes an incentive to encourage car purchases under which the government will give 250,000 yen ($2,500) to consumers who trade in a car 13 years or older for a more fuel-efficient car.
To raise necessary funds for the fresh economic steps, the government is planning to float new bonds worth 11 trillion yen, bringing the total amount of bond issuance in fiscal 2009 to a record-high 44 trillion yen, Kyodo reported.
The additional economy-boosting measures will come on top of already adopted stimulus measures worth 75 trillion yen in total size since last October.
Finance Minister Kaoru Yosano said the government will work out steps by June to restore Japan's fiscal position, which is expected to worsen sharply after the compilation of the fiscal 2009 extra budget, through an eventual hike in the nation's consumption tax.
"The upcoming budget will involve extremely large outlays," Yosano said.
In late December, the Aso Cabinet endorsed a medium-term tax reform programme that enabled his government to raise Japanese sales tax above the current 5 per cent as early as fiscal 2011, provided the economy recovers by that time.