Japan’s Fukuda Wants Measures to Aid Economy

Prime Minister Yasuo Fukuda recently ordered his new cabinet to compile an economic-support package within a couple of weeks to soften the impact of rising prices for oil and other raw materials. Fukuda's policy underlines not only his hope of shoring up his support among the public, but also growing sense of urgency among Japanese politicians regarding the need to support an economy teetering on the edge of recession. He named new economic and finance ministers recently as part of a broader cabinet reshuffling. Recently, the new finance minister made a far more pessimistic economic assessment than those by the ministers moved out of Mr. Fukuda's cabinet. The new finance minister said the country's economy may have slipped into "stagflation," a state of slower growth and accelerating inflation. Exports, that drove Japan's economic growth over recent years, are likely to slow because of softening U.S. demand, he said. Japan's economy is driven by manufacturers that make money by exporting products made from imported resources. The new economy minister predicted Sat. the economy will continue worsening as commodity prices will likely remain high and uncertainties over global financial markets may linger. Fukuda instructed his cabinet members to come up with a framework for the package by mid-August. While the government hasn't disclosed details of the measures, its outlook suggests the package will be larger than the previous two steps taken since late last year. Analysts said the economy may have shrunk in the 2nd-Q, the first time in 4 quarters. Some predict a contraction of as much as 0.8% from the previous quarter.