TOKYO (AFP) - Japan announced Thursday plans for record stimulus spending of 150 billion dollars and millions of new jobs as Prime Minister Taro Aso seeks to revive the economy with key elections looming.
Aso's ruling party, struggling to maintain its almost unbroken half-century grip on power, approved a 15.4-trillion-yen injection for the world's second-largest economy, which is mired in its worst crisis since World War II.
The fresh spending, worth about three percent of economic output, is part of a wider package totalling more than 56.8 trillion yen (570 billion dollars), when tax cuts, loan guarantees and other measures are included.
"This crisis may dramatically change the competitive structure of the economy and industries of the world," Aso said. "Only countries that can turn a challenge into an opportunity can prosper in the future."
Aso, battling a slump in popularity, kept voters guessing on the timing of the next election, saying only that it would be held "at an appropriate time."
"What the public is interested in the most is economic policy," Aso told a press conference to unveil a new growth strategy under which he aims to create four million new jobs by 2020 -- half of them in the next three years.
Aso must call an election by September, but is under pressure from the opposition to hold snap polls sooner.
The premier said his main aim was to push ahead with the stimulus plan, which includes money for renewable power generation, unemployment support, and new spending on medical and nursing care.
The package, which Aso is expected to unveil officially on Friday before submitting an extra budget to parliament, includes more than two trillion yen for promoting solar power and energy-saving vehicles and consumer electronics.
The ruling party also proposed using public funds to purchase up to 50 trillion yen worth of shares from the market if they go into freefall.
Tokyo would guarantee the loans to state-backed organisations to enable them to buy shares from the market in "exceptional" circumstances, the party said.
Japan's economy, once seen as relatively unscathed by the US-born financial crisis, has been battered by plummeting worldwide demand for Japanese cars, machinery and high-tech goods.
In one rare piece of good news, however, Japan's machinery orders unexpectedly rebounded 1.4 percent in February, snapping a four-month losing streak.
Investors welcomed the figures and the stimulus plan, sending the Nikkei stock index soaring 3.7 percent to the highest closing level in three months.
Analysts, however, cautioned against excessive optimism.
"We can't say the economy is breaking out of recession just yet," said Hiroshi Watanabe, economist at Daiwa Institute of Research. "It is still likely to keep wallowing at the deep bottom."
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, but they said the spending boost should provide some support in the future.
"There is not much the government can do directly about the crash in exports, but the imminent fiscal package appears set to provide credit to alleviate some of the pain of related firms, as well as giving a large stimulus to the domestic economy," said Macquarie Securities economist Richard Jerram.
The massive spending boost puts Japan back on familiar ground. The Asian giant spent trillions of yen in the 1990s in an effort to resuscitate the economy after a burst asset bubble ushered in a decade of economic stagnation.
The new package comes on top of stimulus measures approved by parliament since October that were worth a combined 75 trillion yen, of which actual fiscal spending was about 12 trillion yen.
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