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Japan Mulls £202bn In Fresh Economic Stimulus

Japan's government is working on a new spending plan that may combine with fresh stimulus from the country's central bank to stoke stalling economic growth.

According to news agencies in Japan, Prime Minister Shinzo Abe confirmed his coalition government was planning to increase spending by more than 28 trillion yen (£202bn).

But he added that the details of how to spend the money were still being thrashed out.

He made his remarks just 48 hours before the Bank of Japan (BoJ) is widely tipped to confirm further monetary stimulus.

The Bank's measures, if they materialise, may include deepening negative interest rates in a bid to make saving even less attractive and boost spending.

It could also increase its purchases of riskier assets, such as stocks, as well as government bonds through its quantitative easing programme.

The Bank will hope additional stimulus will weaken the yen - a so-called safe haven currency that has seen its value rise again recently amid the UK's vote to leave the EU - damaging profitability within Japan's export-led economy.

But some analysts believe that may not happen - given that the currency strengthened even after the BoJ's surprise decision in January to introduce negative rates for the first time.

It has all added to the opinion that Japan is running out of ammunition to tackle decades of economic stagnation.

Economic growth for the first quarter of the year was measured at an annual rate of 1.9%.

While that does not sound too bad, Japan is under pressure to tackle historical imbalances including weak wage growth and domestic spending.

Companies have not been investing due to an aging and shrinking working population.

Mr Abe is understood to be planning help through scholarships though the bulk of the new funding is likely to go on major infrastructure projects.

Japan's Nikkei closed 1.7% higher on Wednesday in response to news of the looming stimulus (Other OTC: UBGXF - news) .