Japan stimulus debate approaches theatre of absurd
07:39 a.m. Feb 27, 1998 Eastern
By Linda Sieg
TOKYO, Feb 27 (Reuters) - Want to know what's going on in Japanese
economic policy? Then don't listen to policy-makers.
That's the advice from some economists as they seek to make sense of the
welter of public comments, hints and media leaks on the burning issue of
the day -- will Japan put fiscal reform on hold and spend more to boost
its stagnant economy?
''We're telling clients to ignore daily statements and pay attention to
the policy shift that happened in December -- the government has
postponed deficit reduction and switched to stimulus. It's clear that
there has been a complete policy reversal,'' said Richard Jerram, chief
economist at ING Barings. Pundits trying to figure out if Japan is going
to shift policy gears are not getting much official clarification.
Much of the obfuscation is intentional.
''I have repeatedly asked for swift deliberation on and enactment of the
fiscal 1998 budget,'' Prime Minister Ryutaro Hashimoto told a
parliamentary panel on Friday.
''I have said absolutely nothing about what comes after that, and I'm
not saying anything about it now.''
That statement appeared to conflict with Hashimoto's own comment just
one day earlier, when he told the same panel he wanted to come up with
fresh economic steps around mid-March.
It jarred even more harshly with a rash of media articles reporting that
government officials are already hard at work on the contents of an
extra budget for 1998/99.
That's because authorities are trapped in what looks to outsiders like a
highly public and perplexing game of charades.
''There is a fair amount of theatre here,'' one financial expert said.
''I must admit to a sense of disconnect...they're saying it (more
stimulus) is impossible, and they're saying it's going to happen.''
Reluctant to admit mistakes by scuttling the budget for 1998/99, which
starts on April 1, Hashimoto and his cabinet are insisting publicly that
enacting the bill is their top priority.
Doing otherwise, government and political sources say, would risk
delaying its passage or possibly expose the government to a
no-confidence motion. Such a motion would be unlikely to pass given the
ruling Liberal Democratic Party's (LDP) majority in the key Lower House,
but would prove embarrassing and unwelcome ahead of a July Upper House
poll.
Revising the budget would also be a huge and time-consuming project.
''It's much easier to pass it and then have a package,'' the financial
expert said.
Equally reluctant, however, to risk discouraging Tokyo stock market
players and spark a plunge in prices ahead of the critical March 31
business year-end, officials are leaking stories to the media about
expected steps while some LDP politicians publicly push for future
fiscal stimulus.
Sources close to the government say the extra budget, which may be
previewed in an LDP package next month, is likely to contain a mix of
income and corporate tax cuts along with public works spending including
funds for info-tech sector investment.
But the theatrics is causing concern as well as confusion not only among
investors but among Japan's trade partners -- the United States in
particular -- who want Tokyo to act boldly to boost its economy and help
Asia out of its mess.
''There's a lack of specificity about what Japan may do. It may be a
fudge,'' said the financial expert, commenting on why Washington is
keeping up its steady barrage of public pronouncements urging Japan to
do more soon.
Markets, meanwhile, left to speculate on what's in store, appeared to be
growing greedier by the day.
Market talk overseas on Thursday that the package might total 20
trillion yen ($158 billion) snowballed on Friday in Tokyo to whispers of
50 trillion yen.
Sceptics were unconvinced. ''First it was said to be six trillion, then
10, then 15, now 50. That would be 10 percent of GDP (gross domestic
product). It's impossible,'' said Susumu Kato, chief economist at
Barclays Capital.
Kato added that he expected a package of about 10 trillion yen -- half
in tax cuts and half in public works spending, with perhaps some extra
low-interest loans and other steps to top up the headline figure.
($1-126 yen)
((Tokyo Newsroom +81-3 3432 8022 |
