Japan has unveiled a stimulus package worth 11.7 trillion yen ($107bn; £59bn) to boost the country’s economy.

The government hopes that the plan will help people cope with rising prices and stave off a recession.

The plan only includes 2 trillion yen of fresh government spending, with 9 trillion yen in loan guarantees and aid for small businesses.

The package is much smaller than the $167bn the US spent on tax rebates and other measures to revive its economy.

“This package is not a one-off,” said economic and fiscal policy minister Kaoru Yosano.

“It is aimed at continuously supporting the Japanese economy as well as people’s lives.”

No tax cuts

The package also includes discounts on motorway tolls, assistance to farms and help for part-time workers to find better jobs.

The measures do not include the temporary income tax cuts that had been advocated by the New Komeito Party, a junior coalition party.

The government has been reluctant to inject a bigger amount of public money into the economy because of the country’s fragile finances.

Spending on emergency stimulus packages in the 1990s, when the country was mired in recession, means that Japan’s public debt is among the highest of industrialised nations.

Inflation up

Japan’s economy is struggling with consumers facing high energy prices and the country’s exporters suffering as the global economy slows.

The economy shrank between April to June. If GDP contracts between July and September then the country will be technically in a recession.

On Friday, data showed that industrial output rose by 0.9% in July, but economists said that the stronger-than-expected figure did not ease fears of a recession.

Other figures released on Friday showed Japan’s unemployment rate fell from 4.1% to 4%, while core inflation rose to 2.4%.

Little optimism

The rise in Japan’s industrial output, against forecasts of a 0.5% drop, surprised analysts.

“As far as July’s data is concerned, the situation for industrial output doesn’t look so bad, as it showed relatively firm shipments while the inventory ratio declined,” said Hiroshi Shiraishi, an economist at Lehman Brothers.

“But for the outlook, while domestic demand is already weak, there is a strong possibility a slowdown in external demand will have a full impact later on. So we can’t be optimistic.”

The rise in the core consumer price index, which excludes fruit and vegetable prices but includes oil, was at the top end of analysts’ expectations.

However, analysts said fears of an economic slowdown made it unlikely the Bank of Japan would raise rates.

“At first glance, CPI’s rise above 2% may be seen as a factor to prompt the BOJ to raise rates soon, but as it has been saying, the impact of high oil prices will come off in the future,” said Junko Nishioka, economist at RBS Securities Japan.

“It’s the downside risks to the economy that will make the BOJ hold fire.”

News reported by The BBC

The Japanese economy contracted by 0.6% between April and June, prompting fears that it is sliding towards recession.

Declining exports and consumer demand were behind the fall – the first for more than a year – which came after a rise of 0.8% in the previous quarter.

With consumer confidence at record lows, private consumption, which accounts for half of GDP, fell by 0.5%.

Some economists believe the economy will contract in the next three months, partly due to the slowdown in the US.

An economy is considered to be officially in recession after two consecutive quarters of negative growth.

“The data gives the impression that the economy has entered a recession and I think it is in recession,” said Takahide Kiuchi, chief economist at Nomura Securities.

GDP, the total value of goods and services in the economy, shrank by 2.4% between April and June, compared with the same period in 2007.

That is a significant change from the first quarter between January and March, when the economy grew by 4% compared with a year earlier.

Figures released last month showed consumer confidence in Japan fell to its lowest level for 26 years in the quarter to June.

As in many economies around the world, rising costs for energy and food have damaged confidence and made consumers reluctant to spend, particularly on more expensive durable goods.

News reported by The BBC