Sunday March 22 8:16 AM EST
Japan to Move This Week on Stimulus
TOKYO (Reuters) - The policy chief of Japan's ruling Liberal Democratic Party said on Sunday that a 10 trillion yen ($77.5 billion) stimulus package would be announced this week.
Speaking on Fuji Television, Taku Yamasaki said the stimulus measures would focus on new areas such as telecommunications, the environment, education and welfare in addition to the traditional LDP measures aimed mainly on road-building and other heavy construction projects.
"The package will feature public works spending, tax cuts for policy purposes and steps for Japan's bad loan problems," he said. He did not provide any details.
But he said he remained opposed to permanent tax cuts, such as a six trillion yen reduction proposed by the opposition. He said that such reductions took too long to help stimulate the economy and that public works projects were more efficient.
There have been increasingly strong demands from other industrialized nations for a cash injection into Japan's economy to pull it out of a recession and help soften the effects of the Asian financial crises.
U.S. Treasury Secretary Robert Rubin said on Saturday that despite their lack of success industrial nations had to continue to work "to try to help create a situation in which Japan does the kind of things they need to get back on the right path."
"I would say that over the last year and a half the evidence is certainly that that has not worked... That's not just a frustration for us," he said.
The Japanese government has been reluctant to act because it has not wanted to worsen Japan's government debt load, already among the highest of any industrialized nation.
The lower house of parliament on Friday passed a 77.67 trillion yen regular budget for the new fiscal year starting on April 1, the first under a tight fiscal austerity plan that aims to cut state debt to three percent of gross domestic product by March 2004.
In a bow to the concerns about the long-term debt load, Yamasaki said that when the economy is recovering, some increase in the sales tax should be considered.
He said that the ratio of indirect taxation, such as the consumption tax, compared with direct taxation, mainly income taxes, should be examined. Such a shift would follow steps taken by other major nations.
But asked directly if he wanted higher sales taxes, Yamasaki said: "I would not like to say that at the moment because we have upper house elections coming up."
Elections for the less powerful upper house are expected to be called for July and are expected to be a key measure of the LDP's popularity.
Yamasaki also said the proposed spending for bad loans would be in addition to the 30 trillion yen program currently in place to help banks write off bad loans left over from the real estate bubble days.
Yamasaki also said that the level of the stock market as the financial year closes March 31 was very important. He said that indirect investment in the market by the massive postal savings and postal life insurance funds was "one topic to considered from tomorrow."
Companies use earnings from the stock market to help improve their financial results, but the gains are likely to prove short-lived with many market analysts predicting a sharp fall in the market when the government prop is pulled out after the start of the new fiscal year on April 1. |
