Tokyo injects £108bn into Japanese economy

THE JAPANESE government announced a £108bn boost for the economy yesterday. Encouraging enterprise was a key part of the 18,000bn yen package, in a clear acceleration of the pace of structural reform.

THE JAPANESE government announced a £108bn boost for the economy yesterday. Encouraging enterprise was a key part of the 18,000bn yen package, in a clear acceleration of the pace of structural reform.

However, the financial markets were unimpressed by the budget measures, the ninth fiscal stimulus for the ailingeconomy since the start of the Nineties. The Nikkei 225 index fell 1.3 per cent to close at 18,327.28, reversing most of the previous day's gains. The bond market also reacted adversely to news of another increase in the national debt, now equivalent to 118 per cent of GDP. The headline total of Y18,000bn includes just Y6,500bn in extra direct government spending in the next year, which economists said would not be enough to provide the economy with an extra stimulus. The remainder of the package was made up of loan guarantees and multi-year commitments.

Analysts were sceptical, however, that the government package would succeed in stimulating new enterprise. Most thought the trade ministry would remain too prone to intervention. Susumu Takahashi, a senior economist at the Japan Research Institute, said: "All the government needs to do is change the tax system and then leave things alone. The car will run as long as it has fuel, and the fuel is deregulation."