Budget boost for Nikkei

JAPAN'S ruling Liberal Democratic Party yesterday announced a long-awaited economic stimulus package amounting to 16 trillion yen (pounds 75bn).

The size of the proposed package surpassed expectations and was larger than the 14.22 trillion yen boost after the Kobe earthquake in 1995, and added 2 per cent to the Nikkei share index.

Taku Yamasaki, top policy-maker of Japan's ruling Liberal Democratic Party, said the party was considering use of public funds for the nation's bad loan problems but the amount had not been decided. Other details, including whether to cut income tax, would be subject to further talks with coalition partners.

There was a cautious welcome from the US, which has been pressing Japan to take decisive action to prop up the ailing economy, on which South East Asia's economic health also depends.

Mr Yamasaki said the plan's two main pillars would be steps to dispose of bad loans and public works spending.

"We are considering the use of public funds but the scale of such action has not been decided," he said.

The package, later approved by the coalition cabinet, will include the early implementation of 80 per cent or more of public works projects, the highest percentage ever.