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To: Zardoz who wrote (23058)	11/17/1998 5:45:00 PM
From: goldsnow	Read Replies (1) \| Respond to of 116764

Tokyo promises growth in 1999 with latest stimulus Markets greet new 24t yen package aimed at creating 1% GDP growth By Anthony Rowley in Tokyo HE Japanese government yesterday staked its political reputation on a new package of fiscal stimulus measures -- the largest ever undertaken at one go -- promising to reverse the two-year contraction in Japan's economy by next fiscal year, starting April 1, 1999. The 24 trillion yen (S$322 billion) package formally announced yesterday -- following last week's trial balloon floated by the ruling Liberal Democratic Party (LDP) -- differs in key respects from previous ones and met with a fairly positive response in financial markets. The Nikkei-225 Stock Average rose 1.1 per cent yesterday to 14,428.27, a gain of 160.06 points. The package includes new types of public works spending, large individual and corporate tax cuts, job-creation measures, new moves to alleviate the financial sector credit crunch, and steps to stimulate housing market. Missing from the package, however, was any commitment to cut Japan's unpopular national consumption tax. This was raised in April 1997 from 3 per cent to 5 per cent -- a move widely blamed for provoking a subsequent "consumption strike" by ordinary Japanese whose spending has been falling progressively ever since. The LDP has been unable to reach agreement on such a move, although it has conceded to other political opposition demands for the distribution of free spending vouchers to limited groups of Japanese people. The centrepiece of the package is 8.1 trillion yen of spending on "social infrastructure", which Economic Planning Agency (EPA) director-general Taichi Sakaiya claimed would represent "new" money to be spent by central and local governments, beginning next January at the latest. But the boldest statement came from Trade and Industry Minister Kaoru Yosano who suggested that the multi-faceted plan should produce real GDP growth of at least one per cent in the year beginning April 1, 1999, instead of the widely predicted further contraction. EPA head Sakaiya last night stopped short of endorsing the one per cent target but promised the economy would show "positive" growth next year. The EPA estimates that the package is capable of boosting Japan's GDP by 2.5 percentage points in a full year, or 3 percentage points if multiplier effects on the private sector are included. Set against earlier forecasts that the economy would contract by up to 1.5 per cent in fiscal 1999 without further stimulus, this implies that growth of around one per cent should be achievable. The EPA also implied that further stimulus will be applied as necessary to ensure that "from fiscal 2001 there is steady economic growth led by private sector demand". Mr Sakaiya said the plan would also mean there would be "no further increase in Japanese unemployment" which has risen to a post-war high of 4.3 per cent. Prime Minister Keizo Obuchi's government is freezing the Fiscal Structural Reform Act passed this year under former prime minister Ryutaro Hashimoto and plans to issue 10 trillion yen worth of extra bonds in the current fiscal year to finance a third supplementary budget. This will "blow out" total bond issuance in fiscal 1998 to 35 trillion yen and cause what Mr Sakaiya called a "huge deterioration in the government's fiscal position". But the EPA head argued that this is the price the government will have to pay if it is to end the "vicious circle" of declining consumption and investment, rising unemployment and corporate and financial sector distress. This has caused Japan's economy to contract by 0.8 per cent in fiscal 1997 and is expected to knock a further 1.8 per cent off GDP this year. The government also has no option but to take drastic action if it is to overcome economic "friction" with its Asian neighbours and international partners, he added. Agreement has been reached on reducing overall taxation in Japan by some 6 trillion yen in fiscal 1999. This will involve cutting the maximum (combined central and local government) tax on individual income from 65 per cent to 50 per cent and reducing the corporate tax rate from 55 per cent to a more "internationally competitive" level of 40 per cent. Also planned are so-called "policy-oriented" tax reductions to stimulate home ownership and to encourage venture-capital investment in information and other industries. Government ministers insisted yesterday that the new programme differs fundamentally from previous ones. Some 60 trillion yen of stimulus applied to the economy between 1993 and 1996 restored growth to around 3 per cent but had "no lasting effect" because financial sector problems were not tackled in tandem, said Mr Sakaiya. This time, the government is adopting a uniquely comprehensive approach. A 60 trillion yen banking system reconstruction programme, aimed partly at reversing Japanese banks' reluctance to extend new loans, has recently been approved by Japan's Parliament. The Bank of Japan also announced last Friday a plan to buy commercial paper issued by Japanese companies to boost liquidity. The aim is to restore conditions in which Japanese firms are willing to invest, in tandem with public investment. Yesterday' package adds a further 5.9 trillion yen of measures to end the credit crunch in Japan by extending aid even to large corporations through increased lending by the Japan Development Bank and other state agencies. Measures to extend up to 20 trillion yen in special aid to small and medium sized firms in fiscal 1998 and 1999 have already been announced earlier. On the proposed new spending plans, where local governments are unable to shoulder the financial burden of the additional spending, the central government will extend grants, he said. Unlike previous public works programmes which focused almost exclusively on infrastructure such as new highways, bridges and "shinkansen" (high speed rail) projects, the new package will emphasise "future-oriented" investment in areas such as information delivery and other high-tech sectors. Urban transport networks will be boosted, including new "hub" airports, and public amenities in general will be improved. The government claims it will "double the size of living space" in Japan over the next few years by applying various incentives for new housing and for recreational and business facilities. It also aims to create one million new jobs by spending some one trillion yen on retraining Japanese workers to move from sunset industries into higher technology areas. In addition to the US$30 billion (S$49.2 billion) of aid to crisis-hit Asian countries announced earlier by Japanese Finance Minister Kiichi Miyazawa, the package provides for one trillion yen of public financing to be made available for assisting subsidiaries of Japanese corporations operating in Asia and which are unable to obtain financing from local banks. business-times.asia1.com.sg

To: Zardoz who wrote (23058)	11/18/1998 5:26:00 AM
From: Alex	Respond to of 116764

"Nationally, the median resale price -- meaning half sold for more and half for less -- was $132,700 during the July-September quarter, up 4.9 percent from the median during the same quarter a year earlier, the National Association of Realtors said Tuesday. The increase matched the 4.9 percent increase in personal incomes over the same period, but was more than double the inflation rate in consumer prices of around 2 percent. "This is preserving a good balance of buyers and sellers in most areas of the country," said Realtors President Sharon A. Millett. Thirteen of 132 metro areas surveyed by the trade group reported median price increases greater than 10 percent. Only seven areas reported price declines." www2.nando.net

To: Zardoz who wrote (23058)	11/18/1998 6:36:00 AM
From: Alex	Respond to of 116764

Hi Hutch. I'll grant you this - you're certainly not shy with your forecasts : - ). 65% huh? Bring it on! Regarding inflation over the LONG term - you may be right - but what I was thinking of was the fed's reputation for overreacting. There is more bad news to come over the months IMO, and the fed is not done easing. Let's see what happens with Brazil, for instance. The effects of deflation will probably seem more real to many of us in 1999, but gold has been signaling that for a long time. Maybe it will lead going the other way also. Enough from me : - ).