Yukio Hatoyama's "Yu-Ai" -- Message from the Prime Minister
(Provisional Translation)

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Japanese

"Dealing swiftly with the Japanese economy"

There is an electronic sign by the desk in my office in the Prime Minister's Office that displays constantly changing exchange rates, stock prices, government bond interest rates and other financial data. I believe many people in Japan have been very worried about the sharply rising yen and the slumping stock market since the end of last week. As I watched the electronic sign, in response to the Dubai shock, the yen rose temporarily to the level of 84 yen to the dollar and the Nikkei stock average fell more than 300; at seeing this, I too felt strongly that we must not waste any time in taking measures.

Although the Japanese economy is said to be in recovery, mild deflation continues, while unemployment remains above five percent. The percentage of students who have secured jobs for when they graduate next spring has seen a sharper drop than that seen during the collapse of the bubble economy. The employment picture remains very bleak.

It was with this situation in mind that the government had decided to deploy new economic countermeasures focused on employment, the environment, and the state of the economy, in other words, policy measures that are truly necessary for the people's livelihoods. The government intended to use the nearly 3 trillion yen it squeezed out of the existing supplementary budget, after halting its execution, in order to implement these measures.

Given the new situation with addition of the rapid rise of the yen and the slumping stock market, I have instructed Deputy Prime Minister and Minister of State for Economic and Fiscal Policy Naoto Kan to expeditiously put together the government's economic countermeasures, including additional measures to cope with the rising yen, deflation, and the state of the economy. Needless to say, the size of the second supplementary budget will be substantially larger than the amount of the frozen expenditures in the first, existing supplementary budget.

In dealing with the demand side, we will take additional measures such as including prioritized efforts for environmental upgrading of houses as environmental countermeasures in addition to the eco-point system and eco-cars; and easing conditions for the employment adjustment subsidies, assisting the poor, and assisting new graduates and women.

We are undertaking this with the strong resolve not to allow a double dip in the Japanese economy, which has finally begun to show signs of recovery.

I also had a meeting with Governor of the Bank of Japan Masaaki Shirakawa on December 2. I believe that we were able to share the view between the government and the Bank of Japan that deflation impedes economic growth and that it is important to shake off deflation quickly.

On the occasion of that meeting, I welcomed the new financial easing measures decided by the Bank of Japan as swiftly enacted measures to overcome deflation. I believe that the economic countermeasures of the government and these measures by the Bank of Japan are in consonance.

We decided to hold meetings as appropriate between the leaders of the government and the Bank of Japan so that we can continue to exchange information and cooperate closely, and properly deal with the economic and financial situation of the times.

With regard to the direct effects of the Dubai shock, we have been reassured for the time being by the fact that the total amount of the debts is not so large. However, there is a concern that a chain reaction of credit uneasiness could occur with the Middle East as the epicenter. We will keep a close watch on this precarious situation.