Japanese PM Abe hopes to spend his way out of trouble

Japan's prime minister, Shinzo Abe, has rolled the dice on the fate of his government with a huge spending package designed to jolt the world's third-largest economy out of years of sluggish growth.

Mr Abe hopes the ¥10.3trn (£71.7bn) spree will create 600,000 jobs and add 2 per cent to Japan's real economic growth.

"Reviving the economy is our priority," he told the nation yesterday after his cabinet approved the emergency budget. Spending by local governments and the private sector is expected to double the package.

Much of the money will be spent on public works, modernising infrastructure and preparing the country for natural disasters, as well as business incentives.

The government also promised to kick-start stalled reconstruction of Japan's north-east, devastated by the March 2011 earthquake, tsunami and nuclear accident.

Mr Abe is gambling that he can pull the economy out its fifth recession in 15 years and end persistent deflation before a key, July election.

But in a country labouring under a public debt twice the size of its annual economy, the strategy has triggered fresh concerns about its fiscal health.

"Abe is determined to do absolutely everything possible to win the upper house election," said Koichi Nakano, a political scientist at Tokyo's Sophia University.