Page last updated at 06:59 GMT, Monday, 29 September 2008 07:59 UK

Japan agrees funding and tax cuts

Japanese Prime Minister Taro Aso speaks at the UN General Assembly in New York (25/09/2008)
Mr Aso was sworn in as prime minister last week

Japan's cabinet has agreed to provide 1.81 trillion yen ($17bn; 9bn) to stimulate the economy, in what analysts say could be the prelude to elections.

The money is intended to help Japan cope with high energy and food prices at a time of global financial turmoil.

Prime Minister Taro Aso also promised tax cuts and urged the opposition Democrats to support his plans.

Mr Aso's government is less than a week old, and the Japanese economy is on the brink of recession.

The plans now need approval by parliament, where the government controls the lower house but the opposition Democrats have a majority in the upper house.

Move towards polls?

In an assertive speech on Monday, the new leader criticised the opposition for failing to support government policies in the past.

"From start to finish, the Democratic Party's stance was to put political manoeuvring first and the people's livelihoods second and third," Mr Aso said in his speech.

People in central Tokyo, 18 Sept
The Japanese economy is on the brink of recession
Politicians and analysts are describing the speech as the potential opening of campaigning for general elections.

"It's a bit different from previous policy speeches, probably because of the election," Chief Cabinet Secretary Takeo Kawamura told a news conference.

Mr Aso does not need to call a vote, but analysts suggest he is likely to call a snap poll in a bid to shore up his political authority, and try to break the deadlock in parliament between the opposition-controlled upper house and government-controlled lower house.

Economic help

The promised tax cuts would be brought in before the end of the fiscal year next March, the prime minister promised.

He also said he would try to achieve a balanced budget by 2010.

Mr Aso said he would take extra steps if necessary, to deal with fallout from the US financial crisis.

Finance Minister Shoichi Nakagawa had said earlier in the day that the stimulus package would help the economy recover.

"I want parliament to debate it and pass it as early as possible to respond to the urgent need for an economic recovery and help the people, the country and local governments," he told a news conference on Monday.

The government plans to issue so-called construction bonds, to help fund the package.

Mr Aso's government has already been hit by one resignation - that of transport minister Nariaki Nakayama on Sunday. Former Reform Minister Kazuyoshi Kaneko was officially sworn in on Monday to replace him.

In his speech, Mr Aso said his diplomatic priority was to strengthen ties with close ally Washington while working with China and other neighbours for regional stability, and called for extending a naval mission in support of US-led operations in Afghanistan.

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