TOKYO - PRIME Minister Taro Aso was set on Thursday to unveil a package of steps to fight fallout from the global financial crisis on Japan's economy amid predictions he will put off an election many had anticipated next month.

Mr Aso's announcement of Japan's second economic package in two months coincides with growing expectations that the central bank will cut its already rock-bottom interest rates for the first time in seven years when its policy board meets on Friday.

'I will implement bold policies so people who are confronting pain will feel the real effect,' Mr Aso, 68, wrote in his weekly email magazine published on Thursday. 'Drawing on all possible wisdom, we must overcome this 'once in 100 years' crisis.'

Economists were sceptical, however, about whether the package - seen totalling about 5 trillion yen (S$75.1 billion) in new spending - would do much to rescue an economy slipping into recession as a strong yen batters exports and sliding share prices weaken banks.

The Nikkei share average hit a 26-year low earlier this week.

'If the government wants to shore up the economy, it should have focused on easing the pain of exporters, which were the primary victims of the current financial crisis and a global slowdown,' said Mr Akio Yoshino, chief economist at Societe Generale Asset Management.

The package is expected to include 2 trillion yen in tax rebates and handouts, tax breaks on mortgages, a bank rescue scheme to allow public fund injections and relief for small firms suffering from a credit crunch.

Mr Aso also plans to outline a midterm plan to address Japan's huge public debt and anxiety about funding the growing social welfare costs of a fast-ageing society.

Some voters were unimpressed. 'This is just a one-off deal,' said 45-year-old Tami Ishimaru, who works in a property-related business.'I don't think these are radical measures.'

Others said trying to boost domestic demand was the right wayto go, but the scale of the problem risked dwarfing the steps.

'Yes, every little bit helps, but if Aso is saying this is a crisis that happens once in 100 years... and the potential damage to the economy is enormous, then it's still a minor fix, not a major commitment,' said Mr Jesper Koll, CEO of investment consultancy Tantallon Research Japan.

But he added: 'It's important timing-wise that Japan puts something together when everyone else is doing something.'

Mr Aso, who took office in September after his predecessor quit, had been expected to call an early general election to seek a mandate to break a political deadlock caused by a divided parliament, where opposition parties control the upper house and can delay important legislation.

But with Japanese share prices having lost almost half their value since the start of the year and a strong yen hammering exports, Mr Aso has changed his tune.

Some market players welcomed the change of heart.

'Prior to this, the government didn't seem to have much of a sense of danger and appeared to be thinking more about the election than dealing with the economy,' said Mr Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.

Media surveys have shown Mr Aso's popularity slipping and backing for his Liberal Democratic Party running neck-and-neck with that for the main opposition Democratic Party.

'Under these circumstances, they wouldn't have won anyway, so they're putting it off,' Mr Yamagishi said.

No election need be held until September 2009. -- REUTERS