CORRECTED - CORRECTED-WRAPUP 2-Japan govt sets $16.5 bln inflation relief sp

(Corrects paragraph 13 to ...1.8 trillion ..., not 2 trillion).

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* Japan to spend $16.5 bln to ease pain from high prices

* Analysts see little economic effect or political boost

* Temporary tax cuts planned but no details

* Government says no need to issue more bonds

By Yuzo Saeki

TOKYO, Aug 29 (Reuters) - Japan unveiled plans on Friday to spend about $16.5 billion extra this year to ease the pain to businesses and consumers from rising oil and food prices, but its package looked unlikely to help avert recession or restore the government's sagging ratings.

The total economic package was worth about $107 billion but much of that included non-cash measures such as loan guarantees for small businesses, which analysts warned would do little to ease public anxiety about a bleak economic outlook.

"Global rises in oil and food prices are having a significant impact on the Japanese public," Prime Minister Yasuo Fukuda told cabinet ministers and others from the ruling coalition who signed off on the measures.

"It is important that we support the people and small firms and strengthen the Japanese economy."

Many economists say Japan is either already in recession or about to tip into one. Job offers are at a nearly four-year low and inflation at a decade-high 2.4 percent. Industrial output rebounded in July but economists said that was probably a temporary blip. [ID:nT63497]

Analysts questioned the impact of the 11.7 trillion yen package in both economic and political terms, saying it would do little to ease doubts about Prime Minister Yasuo Fukuda's leadership ahead of an election that must be held by late 2009.

"Talk of replacing Fukuda will resume and the need for more decisive leadership will become more urgent," said Jesper Koll, president of investment advisory firm Tantallon Research Japan.

At the insistence of the smaller party in the ruling coalition, the New Komeito, the package included a promise of temporary tax cuts, but gave no details.

Faced with huge public debt, Fukuda has sought to keep new government spending to a minimum despite pressure within the ruling bloc to revert to past pork-barrel practices.