Japan approves new stimulus for ailing economy

The emergency spending package, which is double the size originally expected, is also meant to help make up for lost momentum from reconstruction in the region devastated by the March 2011 earthquake and tsunami.

Prime Minister Yoshihiko Noda's leeway to boost spending is limited by a legislative standoff preventing issuance of deficit-covering bonds. Noda has ordered the government to draft further measures to boost growth by next month.

Friday's decision coincided with news of a 0.1 percent fall in the consumer price index in September, adding to pressure on the central bank to ease policies to help fight deflation, or falling prices, which can hinder economic growth.

National policy minister Seiji Maehara has been among the most vocal officials pushing the Bank of Japan to do more to boost growth, sitting on central bank board meetings to emphasize the government's desire for more action.

Japan's economy has remained in the doldrums for over 20 years and a hoped-for export-led recovery has been stymied by the European crisis and slowing growth in China and elsewhere.

Many economists believe there is a growing risk of a recession contrary to the central bank's expectations of a pickup in growth later in the year.

Although interest rates remain near zero, the bank could further expand its asset-buying program to convince markets it is determined to break out of Japan's deflationary slump, said Matthew Circosta, an economist with Moody's Analytics in Sydney, Australia.

"If they have an inflation goal of 2 percent or 3 percent they should pull out all stops to achieve it," he said. "They've just got to be more aggressive than they are now," he said.

The stimulus package includes more than 264 billion yen ($3.3 billion) on disaster prevention and spending on projects and subsidies to help along the lagging recovery along the northeastern coast, where the magnitude 9.0 earthquake on March 11, 2011 and ensuing tsunami left more than 19,000 people dead or missing.

A big chunk of that is to go to support for small- and medium-size businesses. It also earmarks some 41 billion yen ($514 million) for renewable energy projects.