Can Kan?

31 August 2010 By Ian Campbell

Tokyo’s latest mini fiscal stimulus and the central bank’s supply of yet more cheap loans has impressed nobody. The too strong yen keeps rallying. Currency intervention may be the next move. But even that will achieve little. Japan desperately needs a stronger US recovery.

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Ichiro Ozawa, a 68yearold veteran of the ruling Democratic Party of Japan, intends to challenge Naoto Kan, the current party leader and prime minister, in a party leadership election on September 14.

On Monday Kan's government announced a fiscal stimulus package worth less than half of one percent of Japanese GDP. The measures involved were green initiatives to favour environmentally friendly consumption, assistance to jobseeking graduates and measures to help small businesses.

The Bank of Japan took measures to increase the money supply. It offered banks 10 trillion yen in loans with six month maturity, adding to a 20 trillion yen facility of three month loans that is already in place.

The yen has appreciated from 94 yen to the US dollar at the beginning of May to 84 yen to the dollar on August 31 as weaker US data has encouraged safe haven flows into the Japanese currency.

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