Japan In Further Stimulus Measures

Japanese voters will be going to the polls on 16th December. The ruling Democratic Party of Japan (DPJ) came to power three years ago on the trendy mandate of change, ending nearly 50 years of one-party rule under the Liberal Democratic Party (LDP). In the grip of the worst financial crisis in living memory and the wake of a devastating earthquake and tsunami which claimed more than 20000 lives and wrecked a wide swathe of the nation’s infrastructure (March 2011), it was a mandate that no government could honour. The nation is facing a long-standing challenge of deflation; a demographic time bomb in the shape of a falling birth rate and an aging population which will push up social security spending; and a Yen near historically high rates against major competing currencies. When the election was called, the LDP enjoyed a clear lead in the opinion polls with 23% of those surveyed pledging their support. In the most recent poll, LDP support has slipped to 20% with the DJP gaining support in second place with 15% (+2%).

Although low in comparison to most modern economies, Japan is struggling with high unemployment. The Japanese government has announced a further stimulus package worth $10.7 billion. The package is aimed at creating employment and to support the small business sector. Naturally, the economy will be a key factor in the forthcoming election as both the DPJ and the LDP try to convince the electorate that their policies will offer the best chance for prosperity. Economic analysts were less than impressed with the new move which they interpreted as being on too small a scale to boost the nation’s GDP. The Japanese economy shrank in Q3 by 0.9% which is equivalent to an annualised decline of 3.5%.