The New Nation - Internet Edition

AFP, Tokyo

Japan unveiled yesterday a record trillion- dollar budget for next year despite growing worries about its debt mountain, seeking to revive an economy hit by its worst downturn in decades.

The move came as a batch of data added to worries that Japan's economic recovery is running out of steam, with the jobless rate rising and deflation continuing to hobble the world's number two economy.

Prime Minister Yukio Hatoyama's three-month-old government approved an unprecedented budget worth 92.3 trillion yen (1.0 trillion dollars) for the next financial year starting in April. It predicted that Asia's biggest economy would grow 1.4 percent next year, marking the first expansion in three years, as it claws back from the worst downturn in decades.

"I will do my best to avoid a double-dip recession," Hatoyama told a news conference. Hatoyama, who marked his first 100 days in office this week, has moved to slash what his party deems to be wasteful public spending and redirect money to struggling households.

His budget plan will pile further pressure on Japan's ailing public finances. The government will issue new bonds worth a record 44.3 trillion yen to cover the spending plans. The Organisation for Economic Cooperation and Development has warned that Japan's public debt is set to soar to more than 200 percent of gross domestic product by 2011.

"Rising debt is worrisome for Japan," said Okasan Securities equity strategist Hirokazu Fujiki.

"With the new government, only the allocation of resources has changed and that hasn't prevented debt from rising further."

Japan's economy grew in April-June for the first time in five quarters on rebounding exports and government stimulus measures, but stubborn deflation and a weak job market are seen as a threat to the recovery.