Japan and Australia unveil plans to boost economies

| February 3, 2009 | 0 Comments

Japan’s Central Bank is to purchase 1 trillion yen (£7.87 billion) of stocks owned by struggling financial institutions, in an effort to improve their capital and encourage them to lend.

The Bank of Japan is to buy shares in troubled banks until April next year and hold on to them until the end of March 2012.

The move was welcomed by Tokyo-based hedge fund adviser TRJ Tantallon Research Japan, saying it frees the banks to focus on their main business, assessing credit risks rather than riding the fortunes of the stock market.

Heavy losses on the stock exchange has meant some of Japan’s largest banks were forced to rein in lending and slash earnings forecasts.

Bank of Japan’s Governor, Masaaki Shirakawa, explained that the move is to act as a safety net to stabilise financial markets.

In the third quarter of last year Japan, which is the world’s second largest economy, entered its first recession since 2001.

Meanwhile, the Australian Government has announced a AUS$42 billion (£19 billion) stimulus package.

It is hoped the move will help Australia weather the economic downturn. The country’s Government has halved its economic growth forecast for 2008-09 to 1% from an earlier forecast of 2%.

According to Australia’s Treasurer, Wayne Swan, AUS28.8 billion is to be invested in schools, housing and roads, while the remaining funds will provide a cash boost to low and middle-income earners.

Furthermore, it is hoped the plan will help support and sustain up to 90,000 jobs over the next two years, said Mr Swan.

Australia’s central bank has lowered interest rates to 3.25% - a level not seen since the early 1960s.

Yesterday, France unveiled a €26 billion (£23.5 billion) stimulus package in a bid to boost its economy and fight off the economic downturn.

The French package is designed to help businesses boost their cash flows and to improve rail infrastructure, postal service and energy services.

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