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Japan's economy has been stagnant. To revive the economy the ruling
Liberal Democratic Party has proposed a $124 billion stimulus program.
Included in the stimulus package are increased public-works spending,
a plan to extend postal savings to the stock market, securitization
and disposal of real-estate collateral for bad loans, loans to alleviate
the credit crunch, and public investment in the environment and
in energy.
Noticeably missing in the package is a tax cut proposal. Cutting
taxes is controversial in Japan. Last year Prime Minister Hashimoto
raised taxes and cut spending in an effort to cut the government's
budget deficit. Partly as a result of these measures, Japan's economy
slipped even further to the point where many expect the economt
to slip into recession. If Mr. Hashimoto were to reverse himself
and push for a tax cut it would be an admission that last year's
deficit reduction measures were a mistake. Admitting to this mistake
might cost Mr. Hashimoto his job.
The United States and other countries were pushing Japan to stimulate
its economy. Asia's economic turmoil threatens to throw the region
and possibly the world into recession, and a reinvigorated Japanese
economy might prevent this.
Although the details of Japan's stimulus package need to be presented,
there already is criticism that perhaps half of the proposed measures
are not growth-enhancing and therefore the actual stimulus is less
than the advertised $124 billion. The U.S. had wanted Japan to include
a tax cut in their package in order to provide stimulus. (Updated
May 19, 1998)
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