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.

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.

News reported by The BBC

Japanese plans to introduce an economic package to help people and firms cope with higher prices are being hampered by a political row over income tax.

Junior government coalition partner the New Komeito party is in disagreement with the main Liberal Democratic Party.

While New Komeito leaders are pushing for temporary tax cuts to benefit low earners, the Liberal Democratic Party is generally opposed to the idea.

The Japanese economy contracted from April to June as recession fears rise.

If the economic output also falls between July and September, then Japan will formally be in recession.

‘Grave resolution’

New Komeito policy chief Natsuo Yamaguchi has told economics minister Kaoru Yosano that the tax cuts are vital.

“We will seek to reach an agreement on this with grave resolution,” said Mr Yamaguchi.

His comments came a day after Liberal Democratic Party policy chief Kosuke Hori said it would be difficult to afford the proposed tax cuts, which could cost as much as 3 trillion yen ($27bn; $14.7bn).

The main aim of the proposed economics package is to provide financial relief to households and companies struggling with high energy and food bills, although no exact details have yet been revealed.

The apparent dispute between the New Komeito party and the Liberal Democratic Party comes against a backdrop of possible elections.

While no election for the lower house of Japan’s parliament is needed until September 2009, New Komeito leader Akihiro Ota said last week that a snap election could come at any time.

News reported by The BBC

Barack Obama’s senior economic adviser Austan Goolsbee has accused John McCain of proposing huge tax cuts for rich people and large corporations.

Mr Obama’s tax cuts for “ordinary Americans” would be three times larger than Mr McCain’s, he promised.

Mr McCain’s economic adviser, Doug Holtz-Eakin, countered that Mr McCain’s tax cuts would help firms create jobs.

Speaking to the BBC World Service, both advisers clashed on how to end the US dependence on foreign oil.

In a debate between both advisers on the Business Daily programme, Mr Goolsbee said: “Barack Obama’s tax cuts for ordinary Americans are three times larger than John McCain’s.”
“The way that John McCain’s package ends up being three to four trillion dollars more is that they give humungous tax cuts to high income people and large corporations.”

Small firms

In fact John McCain has no plans for cuts in personal income tax. But he does propose to cut the rate of corporation tax from 35% to 25% in an effort to revive the ailing US economy.

Mr Holtz-Eakin told the BBC: “In this economy in the past six months with over 400,000 jobs lost we’ve seen the small businesses – those with less than 50 employees – add 283,000 jobs.”

He underlined the importance of not damaging those small businesses: “keep them in a position where they don’t have onerous health care costs and mandates to provide expensive benefits to their employees.”

Barack Obama says he will spend $50bn immediately to jump start the economy and introduce tax credits for working families.

He is also proposing to invest $150bn in clean energy over the next decade, creating 5 million new jobs.

Energy policies

Mr Goolsbee said the US had to make a commitment to wean itself off its dependence on oil.

“John McCain believes that we have a dangerous exposure to imported oil” Doug Holtz-Eakin, economic adviser to John McCain

“It is the mentality of the past eight years to listen to the oil companies that got us into this mess and we have to have a different energy policy to get out of it.”

Mr Holtz-Eakin denied that John McCain would follow the same energy policy as George W Bush.

“John McCain believes that we have a dangerous exposure to imported oil,” he said.

“It is his primary objective to put the United States in a position where it is no longer strategically exposed by this dependence.

“The first and foremost objective is to change the way Americans drive,” he added.

Foreclosures

Mr Goolsbee warned that more Americans would lose their homes unless there were tighter controls on the mortgage industry.

He said failure to address the fundamental challenges of oversight of the housing market – an issue that Senator Obama identified 18 months ago – could prompt “a second wave of the foreclosure crisis in the United States.”

Mr Holtz-Eakin said that John McCain would not be afraid to speak out in favour of free trade, even at a time when American jobs were being lost.

“Globalisation is an opportunity.”

However he added: “Not everyone automatically gains from globalisation, and we do have an obligation to help those workers who do not instantly benefit to get an opportunity for the future.”

News reported by The BBC