TOKYO, February 8: As Japanese finance minister Hikaru Matsunaga starts his second week in office, he and the government he serves walk an increasingly precarious tightrope on fiscal policy as it tries to spur the stumbling economy.Tokyo needs to keep alive market hopes for further stimulus measures, while not derailing an already delayed push to enact financial stabilisation bills and the fiscal 1998/99 budget.
The lower House of parliament, debating into the early hours of Saturday, finally approved the financial bills, which would allow the use of up to 17 trillion yen to bolster the deposit insurance system and up to 13 trillion yen of public money to boost capital at banks.
Matsunaga stressed last week that the best thing for the economy, ``at this stage" was the swift enactment of the financial bills and then of the regular budget by the March 31 end of the current fiscal year.
That, however, looks increasingly tough. The government will present the financial bills to the upper House on Monday,seeking their enactment by the end of the week.
By the government's reckoning, that would allow just enough time to have the bank-capitalisation steps in place by end-March corporate book closings and pass the budget on time. But Japanese media have already treated this as an empty wish since there is too little time as it is for an upper House budget debate and further delays are expected -- forcing a stop-gap budget.
The opposition parties are expected to dig in their heels over demands for sworn testimony from a ruling Liberal Democratic Party (LDP) member Shokei Arai over allegations that he received illegal stock profits from Nikko Securities Co. The government and LDP well know that financial markets would not look kindly on a breakdown in the budget process, particularly as a recent run-up in Tokyo stock prices and the yen's value have been largely fuelled by hopes that the measures on the table are a prelude to more fiscal stimulus.
LDP policy chief Taku Yamasaki said on Sunday that his partyplans to take measures to boost stock prices by April, while ruling out any revision of the 1998/99 regular budget. As pressure grew from the United States -- both Treasury Secretary Robert Rubin and Trade Representative Charlene Barshefsky said last week that Japan had not done enough to stimulate domestic demand and lead Asia out of economic crisis -- the need was then further underscored by the government itself on Friday, when it admitted economic conditions continue to worsen.
In its monthly report, the Economic Planning Agency (EPA) said the economy was no longer "stalled", a description the agency had used since November, because the word "stalled" implied the economy would soon regain momentum.Matsunaga and other policymakers dare not dash market hopes by ruling out any fresh measures. This is particularly crucial as the LDP has stressed that steps it is to announce February 20 -- a day before a Group of Seven (G7) finance ministers meeting in London -- will not entail new fiscal spending. Thosemeasures are expected to include revaluation of land assets and an easing of rules on company share repurchases.
At the same time, LDP and government policy makers are wary of embracing new measures publicly because that would play into the hands of the opposition who are critical of the current administration's handling of Japan's economic slump. Yukio Hatoyama, secretary-general of the Democratic Party of Japan, for example, insisted Friday in a Reuters Financial Television interview that the government revise its already submitted regular 1998/99 budget.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
