The lower house of
the Japanese parliament has given the green light on a new sixty billion dollar
stimulus package which they hope will boost small businesses and consumer
spending with the end goal to create new jobs and push forward the nation’s
tentative economic rebound.
This is the latest in a string of packages
the government has previously introduced, with recent figures showing that the
nation’s consumer prices have dropped for the twentieth consecutive month.
The government have worked hard to get this
latest package through parliament, and today’s vote represents a significant
victory for prime minister Nato Kan.
Japan’s stimulus methods are frowned upon
by western nations, who prefer to concentrate on decreased spending to ensure
economic recovery.
Japan, the world’s second largest economy,
has been battling against a high yen, deflation and decreased growth and their
core consumer price index dropped by 0.7 percent compared to last year, latest
data showed.
Deflation is one of the factors that stunts
growth the most, as consumers hold off on their buying until prices drop
further. Analysts say the recent upswing is not necessarily a sign that
consumer demand has improved.
“Yes, there was a slowdown in the decline
in prices in the latest study,” said Stuart Poulson, Head of Corporate trading
at Nikko-Desjardins Asset Management in an email to clients, “But we needn’t
get carried away, this may not be an accurate reflection of the demand-supply
situation in real terms.”
“We could be looking at one-off factors
affecting the balance, such as an increase in cigarette prices.
In summary, it
looks like the recovery from deflation may take a little longer than forecast,”
Poulsen added.
International trade has become less
attractive due to the high yen, a factor the government has been attempting to
keep in check with qualitative easing methods. With Japan’s economy heavily
reliant on its exports, a slowdown in growth for the sector can have a hugely
negative effect on the financial landscape.
Not only that, but it is apparent that a
weakened export business will cause consumer demand to drop.
