FACTBOX-Japan ruling coaltion scramble for economic package

(For more stories on the Japanese economy click [ID:nECONJP])

TOKYO Aug 27 (Reuters) - Japan's ruling coalition parties are aiming to compile an economic package by Friday to help businesses and individuals cope with rising prices in the face of recession fears in the world's second-largest economy.

Following are key aspects of the economic support steps:

WHY

-- Prime Minister Yasuo Fukuda's cabinet vowed in a statement earlier this month to act quickly to address people's fears and pain caused by higher oil and food prices and deteriorating economic conditions. -- The ruling Liberal Democratic Party said in a statement on Tuesday that economic support measures are needed as price rises in a sluggish economy could lead to a further deterioration in job conditions and household finances.

-- The party also said the measures are especially important to help rural areas whose economic conditions are worse than those in major cities.

SIZE

-- The financial size of the package remains uncertain, but the LDP policy chief said earlier this week that it could be worth 2-3 trillion yen ($18-27 billion).

-- Finance Minister Bunmei Ibuki said on Wednesday the package will include expanding government guarantee on loans to small firms by about 400 billion yen. But as not all of the borrowers will default, actual spending will be smaller.

-- A Japanese newspaper reported last week that the government is preparing measures worth 8 trillion yen, including credit lines for small firms.

-- The figures are smaller than in past economic measures. In 2002, the government under then Prime Minister Junichiro Koizumi compiled an economic package worth 14.8 trillion yen, which included public works spending of 1.5 trillion yen.

-- Fukuda's cabinet said the measures will be different from economic packages of the past, which aimed to stimulate demand through large-scale public spending, and focus on changing the economic structure by such policies as promoting energy-saving technology.

-- However, tax cuts of a fixed amount for individuals proposed by the ruling coalition's junior member, the New Komeito party, could cause public spending to balloon. The government spent a total of 4 trillion yen in 1998 when it last implemented similar tax cuts.

FUNDING THE MEASURES

-- The government is mulling an extra budget in the current fiscal year to finance the economic package. It has become an issue because the government could fund it by reallocating existing spending or by tapping into budget reserves rather than issuing more debt, depending on its size.

-- There is a possibility of new debt-covering bonds, but the size of new issuance is expected to be small as the government aims to stick to its fiscal restraint policy.

-- The Japanese government bond market has not become jittery about the package's impact on public finances as many market players expect the size of new issuance, if needed, to be relatively small.

-- The market is more focused on financing of the budget for the fiscal year from next April 1 amid falling tax revenues and snowballing social security spending due to ageing population.

ITEMS

-- Proposed steps in the economic package include lowering highway tolls and subsidising efforts to shift to more energy-efficient vehicles and other equipment in industries such as transport and agriculture. ($1=109.21 Yen) (Reporting by Yuzo Saeki; Editing by Michael Watson)