Japan monthly review: Stimulus packages lead the news in January

By David Azócar

In January, the leading news stories in Japan included a job creation budgetary supplement, a drop in automotive sector exports and the launch Japanese space ship designed to monitor climate change.

Japan had a controversial start to the year in politics. One of the flagship projects of the Aso administration, the supplementary budget, needed the approval of the Lower House. The only reason this was achieved was because the LDP had a majority. There was staunch resistance by opposition which resulted in the resignation of an important politician of the ruling party.

Liberal Democratic Party (LDP) arguments with the opposition are nothing new, but one of the LDP breaking ranks is. Yoshimi Watanabe is an experienced politician who was part of the ruling coalition until January 13, when he decided to step aside. He explained that he disagreed with the budget initiative. Watanabe felt it was not directed at solving the fundamental problems. He also disagreed with the LDP decision to move up Japan’s PM elections.

Ultimately, the $135 billion stimulus package was approved, however. It is designed to insert cash into the economy through direct handouts.

In related news, the Aso administration promised that it will increase public spending and create 1.6 million jobs over a period of three years. This statement ends eight years of tough budget cuts and liberalization, which began under Koizumi and were continued by his successors.


In foreign policy news, the Japanese government decided to provide its military presence to the Gulf of Aden, located between Yemen and Somalia. The gulf is of high strategic importance because oil tankers pass through it when exiting the Persian Gulf.

Japanese Defense Minister, Yasukazu Hamada, ordered Navy vessels to join the multinational effort against piracy. The measure still requires the approval of parliament, which is expected to last at least a month. So far no Japanese ship has been taken by pirates, but three Japanese have been fired upon, with no reported injuries.

January saw stimulus packages

The Japanese economy, as in most other developed countries, is going through hard times. One of the hardest hit sectors is the automotive industry, which had its worst sales in 34 years during December; a decrease in demand of 22% (as compared to January 2007).

During the first half of January, the Bank of Japan announced it would provide a loan of $13 billion to banks. The initiative was due to the slow economy and is aimed at easing lending rates. The move follows the central bank’s decision to lower interest rates to zero last month.

Another word that shook Japan was bankruptcy. Bankruptcies rose by 24.7% in December. On Dec 27, the government announced it would use public funds to assist businesses that are struggling to outlive the financial collapse. The move resulted in an injection of $54 billion, which boosted the Nikkei by 378.93 points (4.93%).

Another alarming sign was a 4.4% rise in unemployment (the highest in three years, 400,000 more than in Dec 2007). 2.7 million people are now unemployed in Japan.

A change which affects Chile was the recent reopening of the Japanese market to its beef and pork exports, which had been banned for five months because of dioxin levels in exports to South Korea.

Japan in space

Finally, January was marked two milestones in space. The first involved the signing of a contract with South Korea for launching a Japanese satellite. The contract represents South Korea’s first sale of its satellite launch services. The launch will take place in April 2011.

The second event involves Japan Aerospace Exploration Agency (JAXA). It launched a spacecraft which will help scientists to understand and monitor the world’s climate changes. The satellite, named Gosat, weighs two tons and will map greenhouse gases in the atmosphere as it orbits at an altitude of 666 kilometers over five years. The probe was launched from Tanegashima in the southeastern region of the country.