Japan unveils further stimulus package to boost economy

Taro Aso, Japan’s Prime Minister, has revealed a second stimulus package for the country.

The 5 trillion yen (£31 billion, $51 billion) package is an attempt to stimulate the world’s second largest economy and include tax cuts, funding for care of children and the elderly and loans for small businesses.

The package is Japan’s second in as many months after the Prime Minister revealed a stimulus package worth 11.7 trillion yen at the end of August.

Commenting on the package, Mr Aso said we need to relieve people’s insecurities in these types of situations and action must be taken.

Japan’s Nikkei index ended up 9.96% today, its third day of recovery. The Nikkei is also rising on the hopes of a rate cut in Tokyo tomorrow, the last time the Bank of Japan cut interest rates was in March 2001.

In South Korea, stocks soared 11.95% while Hong Kong’s Hang Seng index closed up 12.8%.

Meanwhile in London, the FTSE 100 rose 0.67% in early trade while Germany’s Dax gained 1.78%, France’s CAC was up 2.34%.

Markets are responding to the decision by the US Federal Reserve which cut interest rates 0.5% yesterday to 1%.

Prior to the Fed’s announcement yesterday, interest rates were also cut in China and Norway, in what is likely to be a global round of emergency interest rate cuts.

Many analysts believe that the Bank of England and European Central Bank will follow suit next week.

China cut its interest rate to 6.66% from 6.93%, while Norway’s central bank cut rates by 0.5% to 4.75%. However, in stark contrast, Iceland’s central bank raised interest rates yesterday by a whopping 6% just two weeks after it cut rates from 15.5%.

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