Japan should spend a larger-than-expected $154 billion to stimulate its economy, the country's ruling party said on Thursday, but South Korea's central bank left interest rates unchanged and said the economy there was levelling off after a rapid decline.
More big job losses in Australia and a gloomier outlook from the Federal Reserve on Wednesday reinforced expectations any recovery from the world's biggest economic crisis in decades is likely to be slow, patchy and require more action from stretched policymakers.
Stocks in Asia rose after a two-day fall, tracking gains on Wall Street on news Washington is shoring up life insurers and some increased optimism about consumer spending.
Japanese government bonds sank after the ruling Liberal Democratic Party said the 15.4 trillion yen ($154 billion) in new spending on a range of subsidies, loans and other stimulus should be paid for by issuing more than $100 billion in new bonds.
Much of the new spending was focused on the environment and jobs. Shares in automakers and solar power-related firms rose as the plan included measures to promote the use of solar panels and fuel-efficient cars.
The stimulus spending — 3.1 percent of the gross domestic product of the world's second-largest economy — is to battle Japan's deepest recession since World War Two. Exports and corporate profits have tumbled, prompting firms to cut production and lay off thousands of workers.
"The contents look like temporary measures to frontload demand, but they do not pay attention to increasing productivity on the supply side," said Masamichi Adachi, senior economist at JPMorgan.
"This may contribute to GDP for a year. The consequences over the longer term are negative as we are piling up more of a fiscal burden."
Quarterly results from top Japanese retailers including Seven & I Holdings and Fast Retailing due later on Thursday are likely to reflect the tough environment consumers face as job losses mount.
AMMUNITION RUNNING LOW
In Australia, the unemployment rate jumped by the most since the 1991 recession to hit 5.7 percent, piling the pressure on for yet more policy stimulus.
"People have been looking for a very weak employment report for some time, and this is it," said Brian Redican, a senior economist at Macquarie. "It clearly strengthens the case for more rate cuts."
But with interest rates near zero in many places and stimulus spending commitments in the trillions of dollars, central banks and governments are running low on ammunition to counter the dire economic situation.
The vast sums being pumped into financial systems are also causing problems as markets, fearing the supply of more bonds or the end of the interest rate cuts, push bond yields higher, thereby tightening monetary conditions in conflict with central bank aims.
The Bank of Korea held interest rates steady at a record low of 2.0 percent for a second consecutive month and said Asia's fourth-largest economy was stabilising somewhat after a steep fall in exports.
The bank's governor, however, said he would step in to help the bond market and the door remained open to further rate cuts if needed in an effort to cool a rise in bond yields.
The Bank of England is seen likely to keep interest rates on hold for the first time since September when it meets later on Thursday.
The BoE has already cut borrowing costs to a record low of 0.5 percent and committed to a 75 billion pound asset buying programme to restart growth.
Along with the United States and Canada, Britain also reports trade data for February later on Thursday. The figures are expected to confirm the plunge in world trade showing no signs of abating.
