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Japan announces £49bn stimulus

The newly elected Japanese government has announced a £49bn (7.2 trillion yen) stimulus package.

The previous Japanese government launched a £105.6bn (15.4 trillion yen) package in April but the return of deflation and volatile currency markets have prompted the authorities to pump more money into the economy.

The Japanese government says: “We must present an economic package promptly in order to make the economic recovery solid in the face of the current severe economic and employment situation, the yen’s rise and deflation. We will do our utmost to regain Japan’s vigour.”

The Japanese economy grew by 1.2 per cent during Q3 2009, but that wasn’t enough to convince the government that the economy didn’t need a stimulus.

Last week, the Mizuho Research Institute said the Japanese household sector was in “dire straits” and said that corporate investment would remain weak into 2010. It feared that deflation would continue over “a prolonged period”.

The Democratic Party of Japan, which came to power in September finally agreed with both the Social Democratic Party and the People’s New Party as to the size of the stimulus after the announcement was delayed 10 days. This is the first major economic package announced by Prime Minister Yukio Hatoyama.

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