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Japan to issue $110 bln bond for stimulus

The Japanese government unveiled an extra budget for the fiscal year to March 2010, including bond issuance of around ¥10.82 trillion ($110 billion) to fund a record economic stimulus package.

The extra budget includes spending of around ¥14.7 trillion for the stimulus steps, with issuance of construction bonds worth ¥7.33 trillion and deficit-covering bonds worth around ¥3.49 trillion, the Ministry of Finance said.

The stimulus package was prompted by growing fears of an economic free-fall amid the worst recession since World War Two.

The government plans to cut its economic forecast for the current fiscal year to a 3% contraction in real gross domestic product, the Nikkei business daily reported on Tuesday.

In January, the government forecast flat growth for this fiscal year and a 0.8% contraction for the year that ended on March 31.

Finance Minister Kaoru Yosano has said the government needs to revise its forecast given a rapid deterioration in the economy due to tumbling exports and cutbacks in production.

The International Monetary Fund said last month that the Japanese economy, the world's second-largest, will likely suffer a 5.8% contraction in calendar 2009 and will continue to shrink in 2010 by 0.2%.

Tokyo announced earlier this month a stimulus package of ¥15.4 trillion, with which it hopes to raise the country's economic activity by about 2 percentage points and create 400,000-500,000 jobs in the current fiscal year. (Reuters)