[IWAR] JAPAN economic steps

From: 7Pillars Partners (partnersat_private)
Date: Mon Jan 19 1998 - 10:22:02 PST

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    Japan seen paving way for more economic steps
       By Yoko Kobayashi
       TOKYO, Jan 19 (Reuters) - Prime Minister Ryutaro Hashimoto, faced with
       worsening economic climate and mounting political pressure in Japan, is
       carefully laying the groundwork for steps to boost the economy in the
       next few months, analysts say.
       ``We will cope flexibly with changes in economic and financial
       conditions...on both the tax and fiscal front,'' Hashimoto told a
       committee of the Lower House of the parliament on Monday.
       Japan's mass-circulation Asahi Shimbun daily said on Saturday that
       Deputy Cabinet Secretary Fukushiro Nukaga had promised the United
       during a trip there earlier this month that Tokyo will form a large
       extra budget as early as April that may feature more tax cuts, steps to
       boost imports and increases in public works spending.
       ``Hashimoto's advisers, including his secretaries, decided to send
       Nukaga to Washington to communicate Japan's plan to implement further
       reflationary measures and to get Washington's cooperation on the
       exchange front,'' said Minoru Morita, a veteran political commentator.
       ``I believe it will be virtually impossible to see an early recovery of
       the Japanese economy... on the basis of the two measures being
       introduced this month in parliament. I believe it was precisely because
       Hashimoto himself and his people were aware of this that the
       administration sent Mr Nukaga to Washington,'' he added.
       Among measures currently being debated in parliament for approval are a
       supplementary budget for the fiscal year ending in March featuring two
       trillion yen ($15.5 billion) worth of income tax rebates, and financial
       stability steps including the use of 30 trillion yen ($232 billion) of
       public funds to protect depositors and to boost financial firms'
       Japan's economic recovery has stalled, and some say slipped into
       recession, after being battered by a tight fiscal regime since April.
       Worries over Tokyo's financial system following a series of company
       failures as well as regional currency turmoil have added to the sense
       economic gloom.
       Tokyo's official line is that the measures it has announced will help
       the economy get back on a firm recovery track.
       Hashimoto's government has said it has not altered plans to cut Japan's
       state debt -- a long-term goal -- and that this is still compatible
       the short-term aim of spurring an economic recovery.
       But U.S. officials -- not to mention market participants, business
       leaders, opposition parties, and private economists -- want to see more
       action, such as deeper tax cuts.
       ``These (existing) measures will help slow down the speed and the depth
       of the economic downturn, but will not be enough to reverse the
       direction the economy is heading,'' said Yasuyuki Komaki, an economist
       at NLI Research Institute.
       Hashimoto refuses to openly admit Japan is considering more fiscal
       stimulus steps as it has not even managed to get its current stimulus
       and financial stability steps passed in parliament due to fierce attack
       from opposition parties, which accuse the prime minister of economic
       I have received a report (on the U.S. trip) from him (Nukaga), but he
       did not say that he had promised such an extra budget (to the U.S.) as
       reported in the media, Hashimoto said.
       But signs of economic-boosting steps are appearing on the horizon.
       Yoshiro Mori, a senior official of the ruling Liberal Democratic Party
       (LDP), was quoted as saying earlier in the month that Japan should
       consider making permanent its planned one-off income tax rebate.
       Hashimoto shortly afterwards hinted that Tokyo may continue the income
       tax rebate depending on economic conditions.
       ($1 equals 129 yen)

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