Japan's Parliament Approves £93bn Stimulus Package
By Prasanth Aby Thomas | February 26, 2013 9:30 PM EST
The Japanese parliament has approved a £93bn extra budget that the Cabinet had announced early this year, boosting stimulus optimism in the world's third largest economy.
Prime Minister Shinzo Abe had announced the stimulus last month as part of a larger package and the lower house of the Japanese parliament had approved it about two weeks ago. It has now been passed through the opposition-dominated upper house.
The total stimulus amount is estimated to be around 20tn yen, including regional government and private sector spending.
The funds are aimed at several growth-boosting plans, including increasing jobs, developing infrastructure and helping recovery efforts in the tsunami-hit regions.
The package is crucial for Abe, who had come to power in December on aggressive monetary easing promises that could help shore up Japan's ailing economy. Growth in the country had contracted for the third straight quarter in the three months ending December as the slowing global economy hurt external demand.
The parliamentary approval comes as the government moves closer to the announcement of a new chief for Bank of Japan, which is also critical as the central bank remains a key player in the stimulus plans. Abe will be keen to appoint a dovish governor who would share his economic views.
Under the government's pressure, the central bank had resorted to inflation target hikes and open ended asset purchasing plans in January.
But the increased spending has sparked concerns among some analysts, who point out that Japan's fiscal health remains among the weakest in the developed world. Its public debt remains over double the size of its Gross Domestic Product (GDP).
The yen has weakened over 20 percent since November on the government's stimulus boosting rhetoric. The currency had fallen below the ¥94.76 per dollar mark early this week, but weakened to ¥92.15 on eurozone concerns and Bank of Japan chief speculations.
The currency has managed to move up again, trading at 92.22 yen at about 09:57 GMT.
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