Japanese officials are finalizing details of an emergency economic stimulus package this week, stressing the need to help citizens cope with high fuel and food prices. But will it really work? Economists are skeptical. The driving force behind the plan, they say, looks more like politics than pragmatism. Announced earlier this month, the government's plan is likely to include measures to help agricultural and fishing businesses hit hard by soaring fuel costs. It will also aim to slash expressway tolls, expand medical services for the elderly and support small- and mid-sized firms struggling because of rising commodity prices. Prime Minister Yasuo Fukuda and his Cabinet are expected to formally decide on the size of the package by Friday, though the latest media reports have speculated the package will total two trillion-three trillion yen ($18.35 billion-$27.53 billion). While the measures will provide some help to those hardest hit, they don't address the fundamental issues weighing on the economy, said Kyohei Morita, chief economist at Barclays Capital in Tokyo. Growth in the world's No. 2 economy has come to a virtual halt against the backdrop of higher energy prices, slowing exports and the credit crunch.Second-quarter gross domestic product, which contracted at a 2.4 percent annual pace, suggests that the country teeters on the brink of recession. “More so than raising GDP, what the LDP really wants is to raise its approval rating,” Morita said of the ruling party ahead of Lower House elections next year. With approval ratings for Fukuda's Liberal Democratic Party currently in the 30-percent range, it faces an uphill battle for seats if it doesn't give its image a major facelift, he said. Others question whether Japan even needs a stimulus plan. Japan's economy is slowing and may slip into recession, but it will be “very mild and very shallow,” said Glen Maguire, chief Asia economist for Societe Generale. Indeed, Bank of Japan Gov. Masaaki Shirakawa reiterated in a speech Monday that while the country's economy will probably remain stagnant for the time being, stronger fundamentals will help it avoid a deep downturn. Japan's economy will “return gradually to a moderate growth path as commodity prices level out and overseas economies move out of their deceleration phase,” Shirakawa said.
