Japan unveils ambitious economic growth strategy

Japan's Prime Minister unveiled an ambitious goal yesterday to create millions of jobs and return Asia's biggest economy to steady growth as he battles a drop in his popularity and a funding scandal.

Prime Minister Yukio Hatoyama said his three-month-old government aimed to create 4.76 million jobs by 2020. He set a target of annual economic growth of more than two percent, adjusted for price changes, over the next decade.

"I'm determined to accomplish this," he told a news conference.

But the government was vague about exactly how he would achieve the lofty goals, saying it would come up with more concrete measures by around June.

It aims to create new demand worth more than 100 trillion yen, seeking to resuscitate the world's second largest economy after its worst recession in decades.

The government has forecast a 2.6 per cent contraction in real gross domestic product in the current fiscal year to March 2010.

While in the past, "people served the economy," now the economy needs to benefit the people, Mr Hatoyama said.

"In other words, we have to create demand," he said.

The government hopes 1.4 million jobs will be created in the environment and energy sectors by encouraging development of new technology, such as fuel-efficient cars, along with 2.8 million jobs in the healthcare sector.

It aims to reduce the unemployment rate to about three percent in the medium term.

Japan's jobless rate hit a record 5.7 per cent in July. Although it has since retreated somewhat, in November it worsened for the first time in four months, rising to 5.2 per cent.

Mr Hatoyama said Japan would work on establishing an Asia-Pacific free trade area by 2020 to boost growth by accelerating cross-border trade and investment.

"We need to see Asia as a new frontier," he said. "By achieving growth of Asia as a whole, Japan can achieve growth as well."

Japan's economy is widely expected to lose its place as the world's second largest economy to China, possibly next year.

But without China's rapid economic growth, Japan's own economy might be much weaker, analysts say, because the Asian powerhouse is Japan's biggest trading partner.