Tokyo, February 27: Japan again sent mixed signals on the economy, but financial markets on Friday chose to hear what it wanted to believe -- that the government would eventually come up with bolder economic stimulus steps.Prime minister Ryutaro Hashimoto flatly denied that he is discussing measures to boost the economy after the enactment of the regular budget for fiscal 1998-99 starting April 1."I have said absolutely nothing about what comes after that, and I'm not saying anything about it now," Hashimoto told the Lower House budget committee of parliament.
But at almost exactly the same moment, Hiromu Nonaka, a senior member of the ruling Liberal Democratic Party (LDP), was quoted as saying that a supplementary budget for the next business year should be submitted as soon as possible.Investors, hoping that Nonaka's view would prevail and that Hashimoto was just holding his tongue, bid up the benchmark Nikkei Stock Average two per cent higher at 16,831.67 at the close. Bond prices fell on the stockmarket gain and jitters over fresh stimulus.Amid hopes for more spending and tax cuts, the yen strenghtened against the dollar and the German mark. Some currency traders even said the market had upped the ante for its stimulus package to 50 trillion yen, after talk of a 20 trillion yen stimulus overnight.Nonaka has previously called for a six trillion yen stimulative supplementary budget, while other LDP officials have publicly urged packages between five trillion yen and ten trillion yen.
Even before the contradictory afternoon remarks of Hashimoto and Nonaka, the market had been betting for more stimulus as continued weak economic data and a newspaper report of planned stimulus underlined market hopes that the government is planning to do something to help the staggering economy.
The Nihon Keizai Shimbun reported in the morning that the government and LDP were working out a package that would include a permanent reduction in income taxes and more public works spending on information andcommunications.
The financial daily said the additional spending would be financed by a supplementary budget to be compiled after the passage of the regular budget, but offered no figures.
Hashimoto played down that report, telling the parliamentary panel the government should be cautious about implementing fresh income tax cuts.Echoing this reticence, Economic Planning Agency (EPA) chief Koji Omi said, "Although it may seem that the prime minister is positive towards the idea of more fiscal stimulus measures in his statements in parliament, the best thing we can do for the economy at the moment is to pass the budget for next fiscal year."
Finance minister Hikaru Matsunaga also played down media reports that Hashimoto had hinted at new economic stimulus measures by the time of April's Asia-Europe Meeting (ASEM)."Hashimoto's comments merely suggested that Japan will be in a difficult position if it cannot make some sort of statement at the ASEM meeting," Matsunaga said.The government's own data showedits difficult position.Industrial production rose a weak 2.9 per cent in January from the previous month.Reuters
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
