Japan Continues With The Stimulus By Announcing US $81bn Spending Plan

Japan's government agreed on a US $81 billion stimulus package on Tuesday, aimed at preventing the economy from tipping back into recession as deflation persists and a strong yen threatens exports. The new package, earmarked for low-interest mortgages for new home buyers, incentives for users of "green" technologies and extended subsidies for energy-efficient cars and household appliances, aims to encourage reluctant Japanese consumers to spend more.

Analysts, however, were skeptical about the plan's impact and while the most expect Japan to avoid a double-dip recession. Those who predict another slump were not swayed by the latest spending plan. Yasunari Ueno, chief market economist at Mizuho Securities (NYSE: MFG), believes that the package might help the economy to an extent but does not even begin to address the more fundamental issues faced by Japan, such as weaknesses in the global economy and deflation. Japan pulled out of recession in April-June, thanks to a recovery in exports but figures due on Wednesday are expected to show third-quarter growth and was much slower than an initial estimate.

Toyota Motor Corporation (ADR) (NYSE: TM) recently announced that it returned to profit in the latest quarter as government incentives had boosted sales, leading the world’s largest automaker to trim its projected red ink for the year.