Japan PM set to unveil economic package, hold off polls

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Japanese Prime Minister Taro Aso (L) heads for his office in Tokyo. Aso was set Thursday to unveil a new multibillion-dollar package to help Asia's largest economy weather the global economic crisis as he puts off high-risk elections.
(AFP/JiJi Press)

TOKYO (AFP) – Japan's Prime Minister Taro Aso was set Thursday to unveil a new multibillion-dollar package to help Asia's largest economy weather the global economic crisis as he puts off high-risk elections.

Aso scheduled a news conference for Thursday evening where he was expected to say he will hold off on elections until next year. The opposition, which is ahead in polls, has pushed Aso to call a vote as soon as November.

"Policies should come before politics. That's the answer," Aso told reporters Tuesday when asked about elections.

Japanese media, quoting unnamed sources, said Aso would announce an economic package worth five trillion yen (51 billion dollars), of which two trillion yen would consist of benefits sent back in some form to households.

The package will also reportedly include a cut in tolls on expressways and an expansion of tax-exempt housing loans -- hoping to boost the struggling property market.


The stimulative package would be the first drafted under Aso, an advocate of government spending to boost the economy, who took over a month ago in the midst of global economic turmoil.

The package would be almost three times larger than an emergency budget worth 1.81 trillion yen, which was announced in late August by Aso's predecessor Yasuo Fukuda to ease the impact of soaring commodity prices.

Parliament approved the package earlier this month, with the opposition supporting it. But the opposition has warned that further legislation will not have such an easy ride through parliament if Aso refuses to call elections.

Aso replaced Fukuda a month ago with a mission to lead the ruling Liberal Democratic Party (LDP) into elections, which must take place by September 2009.

Analysts said that the LDP feared that if it held the election now, it would lose.

The Nikkei business daily estimated this month that the LDP would lose about 130 seats in the 480-member lower house if the election were held now, with the opposition taking the majority.

"It is hard to say whether putting off general elections will turn out to Aso's advantage," said Hiroshi Hirano, professor of politics at Gakushuin University.

"At least Aso could give voters the impression that he may do something to ease the economic difficulties they face," Hirano said. "But elections at a later time could backfire with a further dwindling of public support."

The LDP has been in power for all but 10 months since 1955 but is reeling from corruption scandals and a slowing economy.

Aso, a 68-year-old blue-blood with a flamboyant campaign style, is the fourth LDP prime minister since 2006.

In a break with his predecessors, Aso puts a higher priority on stimulating the economy than on reducing Japan's ballooning public debt, which is the highest among industrialised nations.

To bankroll the economic package, Aso is expected to tap into reserves in the debt-ridden nation's special budget instead of issuing new bonds, the Asahi Shimbun reported.

Japan's economy suffered its worst contraction in seven years in the second quarter of this year and many analysts believe it is already in recession, which is usually defined as two straight quarters of negative growth.

While Japan's banks have escaped comparatively unscathed from the the financial crisis , many companies' profits are plunging due to the soaring yen, which makes their exports less competitive.

Along with Aso's new package, the Bank of Japan is widely expected to cut its already super-low interest rates on Friday.

The move marks a sea-change for the central bank, which has aimed to tighten credit since March 2006 when it ended an unprecedented policy of keeping interest rates at virtually zero.