TOPWRAP 1-Japan PM to detail new spending amid bleak jobs data


* Japan unemployment at 3-yr high, new jobs fall

* Japanese household spending slides

* PM set to announce new stimulus package (For more on the global financial crisis, click [nCRISIS])

By Yuzo Saeki

TOKYO, March 31 (Reuters) - Japanese Prime Minister Taro Aso was expected to outline a new stimulus plan for the world's second-largest economy later on Tuesday, two days before leaders from the Group of 20 rich and big developing countries gather in London to discuss ways out of the global crisis.

Rising unemployment and falling spending showed Japan was still stuck in its worst recession in 60 years and underlined the parlous health of the global financial system already buffeted this week by the possible bankruptcy of U.S. automakers.

Tuesday's data showed a worrying trend for an export-driven economy mired in its worst recession since World War Two and for Aso's unpopular government: the slump in external demand is feeding into the domestic economy. [JPALLS=ECI]

Japanese unemployment hit a three-year high of 4.4 percent, and may be headed above 6 percent, some analysts say, while the number of new jobs sank to a six-year low. At the same time household spending slid 3.5 percent from a year earlier. [ID:nT109240].

The Japanese economy may have hit bottom in the first quarter this year but there may be more bad news to come, analysts said.

"In usual times, it would then start to pick up, but now we can't expect that to happen. That means companies won't be able to raise cash flow and therefore will continue to cut jobs," said Junko Nishioka, chief Japan economist at Royal Bank of Scotland.

The yen slipped to 98.22 per dollar following the unemployment and spending data. Stocks rose nearly 1 percent on hopes the government will buy shares in a bid to restore consumer confidence.


Aso was expected to map out his government's third stimulus package, which Japanese media said would run for three years and aim to create 60 trillion yen ($612 billion) worth of demand and 2 million jobs. [ID:nT109832]

Some lawmakers have called for up to 20 trillion yen of new spending, reports say, to go with the 12 trillion of pump-priming already announced.

The latest indications of how badly Japan's economy is suffering and Aso's response are likely to weigh heavily at the G20 meeting, where leaders will address a crisis that has felled major banks and cost millions of jobs as the world faces its biggest recession since the 1930s. [ID:nLU680044]

Officials have already acknowledged the G20 summit would fall short of an overhaul of the world economy. U.S. and European leaders have also differed over whether more spending or more regulatory reform are the better response to the crisis.

"There are tremendous downside risks to this global outlook," Asian Development Bank President Haruhiko Kuroda said while releasing the bank's annual outlook in Manila on Tuesday.

"The effectiveness of the global responses to the crisis remains uncertain. Loud calls for protectionist policies are becoming worrisome. As job losses in the major industrialised countries continue, the protectionist voices may only get louder."

Leaders from the United States, Europe and Asia will have plenty of sobering news to consider this week in London.


On Monday, Ireland had its prized Standard & Poor's AAA credit rating cut to AA-plus and was warned it could drop more. [ID:nLU728522]. The Bank of England also moved to prop up another lender, Scottish building society Dunfermline. [ID:nLU228838]

And Spain, among Western Europe's hardest-hit economies, also rescued its first bank since the crisis began, Caja Castilla la Mancha. [ID:nLT726067]

The latest Japanese data came after markets tumbled following U.S. President Barack Obama rejected restructuring plans for General Motors and Chrysler. [MKTS/GLOB]

But the fall proved short-lived, with Asian stocks edging back up as some investors bet the most painful stretch of corporate earnings damage may be over as the first quarter and Japan's financial year drew to a close.

Asian stocks outside Japan were set to finish the quarter with a dip of 0.7 percent but were up 15 percent in March in what would be the largest rise since 1999.

A White House task force on Monday rejected restructuring plans and pleas for billions in funding from GM and Chrysler. GM will get funds to stay in business for 60 days but new loans of up to $30 billion it wants are on hold until it reworks its restructuring plan. [ID:nSP207882]

Chrysler, controlled by Cerberus Capital Management [CBS.UL], was given 30 days to finish a planned alliance with Italy's Fiat or risk liquidation.

The board of French carmaker PSA Peugeot Citroen sacked CEO Christian Streiff, citing the need for change to tackle an unprecedented slowdown for the industry

Developing economies have not been spared, with the ADB forecasting growth slowing this year to the lowest rate since the 1997/98 financial crisis and any rebound next year contingent on a recovery in the global economy.

The ADB said Asia's developing economies, which include China, India, the economies of Southeast Asia, South Korea and Central Asia, should register average GDP growth of 3.4 percent this year, down from 6.3 percent in 2008.

As late as December it had forecast average growth of 5.8 percent. It said China, the world's fastest growing economy, will grow of 7 percent this year, down from 9 percent in 2008. (Additional reporting by Eric Burroughs in HONG KONG and Raju Gopalakrishnan in MANILA; Writing by Paul Tait; Editing by Jan Dahinten)



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