By Yoshifumi Takemoto and Leika Kihara
TOKYO (Reuters) - Japanese Prime Minister Shinzo Abe asked his cabinet on Friday to compile a package of stimulus measures to support the economy and build infrastructure to cope with large natural disasters, the government's top spokesman said.
Chief Cabinet Secretary Yoshihide Suga told reporters that the package will include steps to promote investment for growth through aggressive use of fiscal investment and loan programmes.
The government will compile the package as soon as possible, although the size of spending will depend on proposals to be made by various ministries, Economy Minister Yasutoshi Nishimura told a news conference after a regular cabinet meeting.
"I've received an instruction from the prime minister to compile a new economic package to guard against the chance overseas risks may hurt Japan's economy," Nishimura said.
Japanese policymakers have been under pressure to fend off heightening overseas risks with a diminishing tool-kit, as the U.S.-China trade war and soft global demand have hurt the export-reliant economy.
Finance Minister Taro Aso said the planned economic package should help enhance productivity and achieve strong growth to overcome the pressure caused by a declining population, which he said was the "biggest problem" Japan faces in the long run.
Aso added that the size and scope of the stimulus still needed to be worked out. He suggested that a supplementary budget would be compiled by the year-end, along with an annual budget for the next fiscal year that starts in April 2020, to ensure the economic package would be rolled out over a 15-month period.
Abe had told a top economic council on Thursday that the government will consider what policy measures it can take to prevent global risks from derailing the economy.
Japan's economic growth likely slowed to an annualised 0.8% in July-September from 1.3% in the second quarter, a Reuters poll showed this week. The data will be reported on Nov. 14.
An increase in the sales tax to 10% from 8%, put in place from October, may also hurt consumption, analysts say.
A key Japanese economic index, the index of coincident economic indicators, rose a preliminary 2.0 points in September from the previous month, Cabinet Office data showed later on Friday, signalling an uptick in economic activity before the tax increase came into effect.
The sub-indexes for retail sales and wholesale trade both rose 7.3 points in September from August, seeing their largest jumps since April 2015, due to demand for big-ticket items such as cars and household electronics, and cosmetics and medicines.
Slowing growth underscores the challenge for Abe's government as it tries to strike a delicate balance between the need to boost growth and fix the industrial world's heaviest public debt burden that is more than twice the size of Japan's $5 trillion economy.
Some economists worry that additional public works spending would further strain the nation's dire public finances and aggravate a labour crunch in a fast-ageing population.
(Additional reporting by Daniel Leussink and Tetsushi Kajimoto; Editing by Sandra Maler, Shri Navaratnam, Raju Gopalakrishnan)