Japan and China try to stop rout

JAPAN and China are considering taking fresh steps to halt a plunge in share prices and revitalise their reconomies.

China's ruling Communist Party elite has vowed to take a slew of measures to respond to an economic slowdown that it says will make 2009 the most difficult year in nearly a decade.

And Japanese Finance Minister Kaoru Yosano says stocks are close to their lowest levels in 26 years.

"Excessive stock falls are undesirable. The government will consider what it can do if stock prices fall too much," Mr Yosano said.

Mr Yosano, who is also the Economics Minister, did not say what additional measures the Japanese government might take.

"Stock prices must in principle be determined by market forces," he said.

But excessive falls would hurt banks, insurance companies and other firms, added Yosano, who took over the finance post last week after Shoichi Nakagawa resigned amid claims he was drunk at a G7 press conference.

Japan's government has already announced a series of steps to stimulate Asia's largest economy, including a plan to hand Y2 trillion ($A32.81 billion) back to the public to kick-start consumer spending.

But analysts say the measures are expected to have a limited impact on the overall economy, which is reeling from a steep drop in exports.

Japan's Nikkei stock index fell 2.60 per cent in morning trade on Tuesday after Wall Street hit near 12-year lows on investor disappointment over Washington's strategy for rescuing ailing banks.

At one point the Nikkei briefly slipped below a 26-year closing low of 7,162.90 points seen on October 27, 2008.

China's politburo issued a statement during which the party outlined its broad priorities ahead of next month's annual parliamentary session.

"We will increase large-scale government investment, implement and readjust a plan to revive industries, make great efforts to boost innovation, and greatly enhance the level of social security," the politburo said in a press release.

The statement followed a meeting of the 25-member politburo presided over by President Hu Jintao.

The party has signalled in recent days it intends to take measures during the National People's Congress session, beginning on March 5, to cushion the blow from the slowest economic growth in nearly 20 years.

China's growth slowed to 6.8 per cent in the final quarter of last year, down from the double-digit expansion seen for most of this decade.

The global financial crisis has particularly hit the nation's vital manufacturing and export sectors, leaving at least 20 million migrant workers jobless.

This has raised concerns of social unrest, and the politburo alluded to such worries in its statement.

"The tasks of reform, development and stability are quite onerous," it said.

The statement offered no specific policy proposals but said the government would seek to increase domestic demand, promote industrial restructuring, "improve living standards and promote social harmony".

The grim warning is the latest of several from China's leadership, which in November unveiled a spending package worth $US580 billion ($A902.72 billion) by the end of 2010 to cushion the impact of the crisis.

Premier Wen Jiabao said this month that China must take "extraordinary measures" to boost the economy beyond that package, according to the Financial Times.

The People's Daily, the Communist Party's mouthpiece newspaper, also warned this month about possible unrest.

It said authorities must "control factors that could cause instability or problems like housing, the stock market, failed companies, mass layoffs and migrant workers going home to the countryside".

Source: http://www.news.com.au/