Japan approves £72bn stimulus package

Expected to create 600,000 jobs.

Japanese yen notes. Photograph: Getty Images.

The Japanese government has approved a stimulus package of 10.3tn yen (£72bn) in an effort to strengthen its economy.

Apart from fall in domestic consumption due to weak currency, the country saw decline in exports due to slowdown in demand from the US, eurozone and China markets in the recent times. With this package, the country will invest in education and social security areas and provide incentives for businesses and rebuild areas devastated by the 2011 earthquake and tsunami.

Some industry analysts think that the package is only a short-term solution to the country’s economic growth and do not address the long-term sustainability of economy.

The Japanese Prime Minister Shinzo Abe said: “Unfortunately, the previous administration failed to work out how to boost growth and expand the economic pie. It is vital that we have an economic strategy that can create jobs and raise incomes to sustain growth.”

Since November 2012, the Japanese yen declined by approximately 12 per cent compared to the US dollar.

Martin Schulz of Fujitsu Research Institute told the BBC: “So far what we have seen is measures to kick-start the economy. But once the stimulus boost is over, the coffers will be empty again and Japan will have no more money to spend.”

Mr Schulz said Japan needed to improve its relations with China to help its exporters' sales in the country, not least because demand from the US and eurozone is likely to remain subdued in the near term.

On the domestic front, Japan needs to ease regulations in key sectors such as construction, healthcare, retail and agriculture to make them more attractive for investors, Schulz added.