Japan unveils plan to tackle impact of strong yen

The Japanese government released an interim plan on Tuesday to cope with the negative impact on the economy of historic rise in value of the yen, giving a top priority to preventing the hollowing out of the nation's industry. Under the plan, the government will drastically increase subsidies for companies planning to build factories in Japan and encourage Japanese businesses to enhance their overseas activities securing energy resources abroad by utilizing the merits of the yen's rise against the US dollar and other major currencies. The measures also include job creation and support for small and mid-sized firms hurt by the strong yen, as well as a corporate-tax cut. The emergency measures will be included in the third extra budget for fiscal 2011. The yen's strength would lead to the hollowing out of the Japanese industry as domestic manufacturers may increasingly shift their production overseas in pursuit of lower cost. It will also worsen export profitability and affect earnings for exporters by making Japanese products more expensive overseas. The yen reached a post-war record of JPY 75.95 per dollar on August 19. The Japanese currency traded at JPY 76.54-56 at 3 p.m. (0600 GMT).