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Japan OKs $10.7B stimulus, aiming to boost growth

By ELAINE KURTENBACH, AP Business Writer Published: November 30, 2012
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Still, the better-than-expected industrial production data suggest the downturn could be bottoming out late this year, helped by a stronger U.S. economy, said Nishioka of RBS Japan.

“The main driver of the recovery is overseas demand, though there is still a downside risk from China,” she said.

October brought no improvement in labor conditions, with unemployment unchanged at 4.2 percent and the ratio of jobs available falling to 80 per 100 jobseekers from 81 the month before.

Tensions over a territorial dispute with China have bitten into exports that already were limping due to weak global growth and the prolonged strength of the Japanese yen against other currencies, which makes them relatively expensive in overseas markets.

Meanwhile, the consumer demand that is a major driver of growth has remained anemic: Retail sales fell 1.2 percent in October from a year earlier, the government reported Thursday. A slight improvement in seasonally adjusted terms was mainly due to rising prices for food and energy, thanks to rising electricity rates and gas prices.

Weak spending on cars and consumer appliances suggests consumer sentiment is weakening due to worries over job prospects, Capital Economics said in a research note. It argued in favor of longer-term structural reforms to nurture growth, given Japan's massive government debt, which is more than twice the country's gross domestic product.

“Although this is an age-old tactic for winning votes, we think it won't do Japan any favors in the medium term,” it said. Growth is becoming increasingly reliant on government support. Further stimulus could reduce the private sector's ability to pick up the slack in the future.”

To finance the stimulus package, the government is dipping into its reserve fund. The government released a smaller package of $5.1 billion in October in an effort to stave off recession.


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