To rescue Asia’s biggest economy:

Japan set for $150 bln stimulus spending

japan: Japan’s ruling party Thursday approved a record stimulus spending plan of more than 150 billion dollars to rescue Asia’s biggest economy as fresh data revealed an unexpected boost in manufacturing .

The 15.4 trillion yen injection — about three percent of economic output — would be part of a wider package worth over 56.8 trillion yen (570 billion dollars), when tax cuts, loan guarantees and other measures are included.

Prime Minister Taro Aso was this week expected to announce the stimulus plan, which includes money for solar power generation, payments for laid off non-permanent workers, and new spending on medical and nursing care.

The package will also see more than two trillion yen spent on kicking off a “low-carbon revolution” promoting solar power use, energy-saving vehicles and consumer electronics, a ruling party panel said.

It would also raise the tax-free amount of money parents can give to their children as gifts — a bid to tap the substantial savings of Japan’s growing elderly population to boost residential property purchases.

The report said that after the asset bubble burst in the early 1990s, “the Japanese economy staged an export-led ‘single-engine’ recovery that assumed the world economy will continue high growth.”

“Now that this assumption has collapsed... it is no longer realistic to expect that Japan will be able to go back to the growth path by depending on exports of conventional goods,” the report said.

Japan’s economy logged its worst performance in almost 35 years in the last quarter of 2008, shrinking at an annualised pace of 12.1 percent. Analysts expect another sharp contraction in the first quarter of 2009.

Plummeting worldwide demand for Japanese cars, machinery and high-tech goods has put Japan on course for its worst economic slump since World War II.

The current account surplus more than halved in February from a year earlier as exports plunged, data showed Wednesday, though that was an improvement on a record deficit logged the previous month.

But in rare piece of good news Thursday, machinery orders — a leading indicator of corporate capital spending — unexpectedly jumped in February from a month earlier, ending a record four months of declines.

Core private-sector orders, which exclude volatile demand from power companies and for ships, rose 1.4 percent in February from the previous month.

The rise reversed a 3.2 percent month-on-month fall in January and came after an average market forecast of a drop of 7.9 percent. Tokyo,Thursday, AFP