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"Japan's Fiscal Package: Drastic Measures To Revive "Stagnant" Economy"

by Steve Hudovernik and Elizabeth Adams

Volume 2, Issue 8
Saturday, May 16, 1998

BIRMINGHAM - Due to overwhelming demands for news on the Japanese economy, a senior official of the Japanese Economic Planning Agency's Coordination Bureau held a supplementary briefing to answer specific economic questions.

He highlighted three goals of the April fiscal stimulus package: to increase domestic demand to promote short-term growth; to achieve structural reforms in the economy to promote long term growth; and to settle the problem of non-performing loans in the Japanese financial system.

This fiscal package contains approximately Y7.7 trillion in public spending increases for social infrastructure investments, Y4.6 trillion in tax cuts, an additional Y4.35 trillion includes provisions for the disposition of non-performing loans secured through the use of land as collateral, and initiatives to help small and medium-sized businesses. In particular, the government wants to completely remove the loans' influence from Japan's balance sheet, the senior official said.

However, he cast doubt on the permanence of the tax cuts, and noted only Y2 trillion is allocated for each of the next two fiscal years. But financing additional tax cuts would increase the fiscal deficit, which is at 6.7% of the GDP and is already too high compared to other industrial countries.

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