X. Measures taken by Japan to stimulate the recovery of the world economy

Mr. Fukei (Asahi Shimbun): You referred at the very beginning to the greatest challenge for the Summit meeting this time which is the recovery of the world economy. According to the Economic Declaration that was adopted today, there is a reference to what Japan should be doing, and that is "to implement fiscal and monetary measures to ensure sustained non-inflationary growth led by strong domestic demand." Specifically what measures will Japan employ? And I would appreciate your answers on the following specific questions: The Government in the earlier session of the Parliament passed a supplementary budget to stimulate domestic demand; I wonder if there is going to be a second supplementary budget in the autumn, or in the medium-term? In compiling a budget proposal for next fiscal year, do you intend to further increase public works investment? In the United States, we hear some voices expecting income tax cuts in Japan; any views on that? My last question: On monetary policy, Japan already has lowered its interest rate, official discount rate, to the lowest-ever level; what is your view on further cuts?

Prime Minister Miyazawa: In the statement this time, we referred to the efforts that each of us -- Europe, North America, and Japan -- should be doing. Needless to say, what you mentioned is stated. Not that this should be done within a specific time span, but as G-7 we reaffirmed what is taken as common sense or conventional wisdom. As you mentioned, we did pass a supplementary budget earlier and implemented a huge Y13 trillion stimulative package, which I believe is appreciated. Such measures, fundamentally I believe, are important. To employ such measures, I think, is as a start very important, until there is a full- fledged recovery. Your question is whether there could be a second supplementary budget. My view is that, with the earlier supplementary package, the recovery will be put in place clearly, although gradually. And I therefore have no specific thoughts about a second supplementary budget. However, the economy being what it is, if recovery is laggard, then I believe we shall have to consider some additional measures. That should be taken for granted. Now, what about public works investment? That would be one of the items, but I believe there would be a need for a new public investment. This may not be a precise description, but we did have, for example, some new areas in terms of public investment covered in the earlier package. And I think these areas would be important: science and technology and education. You also asked about the tax. There is a feeling amongst the people that the tax burden is heavy, that the income tax burden is heavy. As I have been saying in the Diet, I do accept that. With the tax reform around 1987-1988, we drastically reduced the progressiveness of tax rates, and reduced the brackets to five. That was a significant reduction from the past. But from the viewpoint, shall I say, of our European or American allies, we should like to further cut these brackets. I think we shall have to consider the overall tax system. Next year would be the year for recalculation of pension finances, or pensions actually, and we will be facing some important turning points, and I think we are approaching the time where we shall have to be reviewing the tax system as a whole. Monetary policy belongs to the purview of the Bank of Japan. As you pointed out, the official discount rate in Japan today is at the lowest level in history, and I therefore have no specific comment to make on that.

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