By Shigeo Kodama

TOKYO (MNI) – To counter global slowdown, the government said it is
compiling a second economic stimulus package in two months totaling Y880
billion, following stimulus measures worth about Y400 billion adopted last
month.

Both packages will be basically funded by reserves in the fiscal 2012
budget and thus do not require parliamentary approval but economists expect the
effects of the measures to be limited.

The government estimates the two packages would create 120,000 jobs and
push up Japan’s real GDP by 0.4 percentage point in a 12-month period.

But Takumi Tsunoda, senior economist at Shinkin Central Bank, is skeptical
about the impact, saying, “The actual positive impact will be lower than the
government’s estimate” as it tends to take time to implement fiscal programs.

The government has not used up its budgets for rebuilding the northeastern
region hit by the March 2011 earthquake disaster, he said.

On Friday, the government said it expects to see the positive impact of the
stimulus packages in the first half of next year.

Finance Minister Koriki Jojima told reporters that the latest stimulus
packages “will a have positive impact” on supporting the economy as they
includes deregulation measures, outlays for rebuilding the disaster-hit areas
and revitalization of the economy.

In a campaign before Dec. 16 lower house elections, the government led by
the Democratic Party of Japan also said it is considering drafting a
supplementary budget for fiscal 2012 as a third stimulus package.

Many private economists believe that Japan’s economy peaked around March
and has been in a downturn since then.

GDP contracted a real 0.9% on quarter in July-September, slumping after a
0.1% growth in April-June and marking the first contraction in three quarters.
On an annualized basis, GDP fell 3.5%, down sharply from a 0.3% rise in the
second quarter.

But some economists said the worst of the economic slump may over around
the end of the year.

Yoshiki Shinke, senior economist at Dai-Ichi Life Economic Research
Institute, said industrial output in October and the outlook for November and
December indicate “the possibility that the economy will hit bottom” in
October-December.

According to the METI’s survey, industrial production, a coincident
indicator of the economy, is expected to rise 0.8% q/q in Q4, posting the first
rise in three quarters.

Japan’s industrial output unexpectedly marked the fist rise in four months
in October on higher demand for semiconductors and automobiles but the economy
remains in a slump hit by the global slowdown, data from the Ministry of
Economy, Industry and Trade showed on Friday.

Output of chips rose on strong demand for smartphones in Asia while car
production was backed by solid demand in North America and introduction of new
models in Japan, a METI official told reporters.

The ministry’s survey showed that output will rise in December after a
small drop in November while economists expect the Japanese economy to post a
second straight quarter of contraction in October-December as demand in Europe
and China has yet to show a clear sign of recovery while the Sino-Japanese
territorial dispute lingers.

“Despite the positive reading, we still can’t rule out the possibility for
a second straight economic contraction in the October-December quarter as key
components such as exports, private consumption and non-residential investments
are expected to make some negative contributions to the nation’s economy,” said
Taro Saito, senior economist at NLI Research Institute.

“But it is also true that the sharp downturn of the economic activity,
driven by deteriorating export conditions and the termination of government
stimulus measures, is now gradually stabilizing.”

Output of electronics parts and devices rose 14.7% last month, a second
straight rise, following a 2.4% increase in September, while production of
transportation equipment, including vehicles, increased 1.1%, the the first rise
in six months.

The rebound in output of transportation equipment was due to sales efforts
by carmakers, the METI official said, although the latest industry data showed
that new vehicle sales in Japan fell for a second straight month in October
after making the first annual decline in 13 months in September.

The government terminated subsidies for buying low-emission vehicles in
September, while Chinese consumers boycotted Japanese cars amid the territorial
row.

Meanwhile, the ratio of shipments to inventories of electronic parts and
devises stood at +2.0% in October, improving for three months in a row after
-0.1% in September and -1.4% in August and posting the highest growth since
+4.0% in June, METI data showed. It indicates downward pressure on semiconductor
output is easing.

–MNI Tokyo Bureau; tel: +81 90-4818-1387; email: skodama@mni-news.com
–MNI Tokyo Bureau; tel: +81 90-4670-5309; email: msato@mni-news.com

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