Japan’s Abe orders new stimulus package

TOKYO: Japanese Prime Minister Shinzo Abe ordered a new round of fiscal stimulus spending after a crushing election victory over the weekend as evidence mounted the corporate sector is floundering due to weak demand.

Abe did not give details on the size of the package, but Japanese stocks jumped nearly 4 percent and the yen weakened over perceptions a landslide victory in upper house elections now gives him a free hand to draft economic policy.

An unexpected decline in machinery orders shows the economy needs something to overcome consistently weak corporate investment.

Economists worry, however, that Abe´s focus on public works spending will not tackle the structural issues around a declining population and workforce.

More public works also increases pressure on the Bank of Japan to keep interest rates low and the yen weak to make sure stimulus spending will gain traction.

The government was ready to spend more than 10 trillion yen ($100 billion), ruling party sources told Reuters before the election.

"We are going to make bold investment into seeds of future growth," Abe told a news conference on Monday at the headquarters for his ruling Liberal Democratic Party (LDP).

Japan´s ruling coalition rang up a stronger-than-expected victory in Upper House elections, as voters chose stability despite concerns about Abe´s economic policies and plans to revise the post-war pacifists constitution for the first time.

Abe said he wanted to strengthen agriculture exports from rural areas and improve infrastructure, such as trains and ports, to welcome more tourists and cruise ships from overseas.

"We have promised through this election campaign that we will sell the world the agricultural products and tourism resources each region is proud of," he said.

He reiterated a campaign pledge to improve access to child care and elderly care.

He will also consider providing grants to students struggling with college debt.

The prime minister said he wanted to take advantage of the Bank of Japan´s zero-interest-rate-policy and issue bonds for public-private partnerships.

The government will also sell construction bonds, which are earmarked for public works projects, for the first time in four years to fund part of the stimulus package, the Nikkei newspaper reported, without citing sources.