TOKYO (AP) - Japan is set to unveil a 1.8 trillion yen (US$16.5 billion) pump-priming package Friday to shore up the flagging economy hit by soaring energy and material prices, Kyodo News reported.
The Ministry of Finance said no announcement had been made yet and declined comment on the Kyodo report, which cited ruling coalition lawmakers.
The measures will include income tax cuts, although the size of the tax breaks and their timing won't be decided until later, Kyodo said.
The package is also expected to provide financial aid to small and midsize businesses and discounts for expressway tolls.
Many economists see the stimulus package as a publicity stunt by the unpopular Prime Minister Yasuo Fukuda to revive approval ratings for his Cabinet.
Public discontent against Fukuda has been growing following a series of scandals, including lost pension records, bribery in the military and dubious spending by the agriculture minister.
Growth in the world's No. 2 economy has come to a virtual halt against the backdrop of higher energy and materials prices, slowing exports and the global 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.
Former Prime Minister Junichiro Koizumi, whose five-year term ended last year, had set economic reforms as his major goals in an effort to shrink Japan's ballooning public debt, and had steered away from massive government spending.
Opinion is still divided on whether deficit-covering bonds would be issued to cover the cost of the stimulus package.
Also Friday, the government issued data that showed signs of accelerating inflation, fueled by soaring fuel and raw material costs.
Japan's core inflation rate surged to a decade high of 2.4 percent last month, according to government numbers, climbing for the 10th straight month.
The jobless rate fell to 4 percent in July from 4.1 percent.
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