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Japan stands ground on fiscal planning


Financial Post, Daily edition, Tuesday, February 24, 1998

Japan stood its ground yesterday against promising quick fiscal measures to boost its economy, despite calls from its Group of Seven partners for it to act.

``I did not make any pledge to form a supplementary budget for the fiscal year 1998-99, although some media reports said I did,'' Finance Minister Hikaru Matsunaga told reporters after returning from a meeting of G7 finance ministers in London over the weekend.

Earlier, Vice-Finance Minister Eisuke Sakakibara told reporters: ``What we said is that we will try to pass the fiscal 1998 budget as quickly as possible. He added Japan made no promises at the G7 meeting about what it might do beyond that.

The G7, which groups the top seven industrialized counties -- Japan, the U.S., Germany, Britain, France, Italy and Canada -- singled out Japan for its weak economy and cited a view that Tokyo needs to boost the economy with fiscal measures.

``In Japan, activity is low, and the outlook is weak,'' the G7 said after the meeting. While the group praised Japan's financial reforms, it added: ``In the view of the [International Monetary Fund] there is now a strong case for fiscal stimulus to support activity during 1998.''

The chief government spokesman, Kanezo Muraoka, specifically denied Japan had promised to compile a stimulative supplementary budget for the coming year.

Vice-Trade Minister Osamu Watanabe also weighed in, saying steps the government had already taken would lead to an improvement in the economy.

The Economic Planning Agency, meanwhile, underscored the frailty of Japan's economy, saying a key gauge of economic health, the diffusion index of coincident economic indicators, fell below the ``boom or bust'' 50 mark for a third straight month in December and would likely stay below that line for January.

The yen slid to more than 129 to the US$ in Tokyo, its lowest level since Jan. 20, partly on Sakakibara's remark there had been no promises of fiscal steps. Japanese government bond prices rose sharply. Share prices also fell.

Source: This information is provided by the Financial Post.

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