JAPANESE ECONOMIC PACKAGE SEEN AS MAJOR CHANGE
The economic package unveiled yesterday by
the ruling Liberal Democratic Party (LDP) marks the start of a
major shift away from the policies of the past, private
economists and government officials said.
    "A big step forward has been taken," said Industrial Bank of
Japan Ltd senior economist Susumu Taketomi.
    The package, seen as a response to mounting overseas
pressure to boost the sagging Japanese economy, calls for a
supplementary budget of more than 5,000 billion yen later this
year, plus increased imports.
    Although the measures must still gain the approval of the
Finance Ministry, economists said the government will find it
too difficult to alter the measures significantly once they
have gained domestic and overseas backing.
    "At last, the LDP and the Ministry of Finance are turning a
corner," said Sumitomo Bank Ltd's chief economist Masahiko
Koido.
    For the past five years the government has adhered to a
tight fiscal policy in its drive to stop issuing deficit
financing bonds in 1990.
    To meet that goal, spending departments are required to
submit annual budgets for current expenditure 10 pct below the
previous year and investment five pct below.
    Masayoshi Ito, chairman of the LDP's policy affairs
council, said yesterday the government must stick to its 1990
fiscal reform target, but should review the ceiling it places
on public works spending.
    Even some Finance Ministry officials privately acknowledge
that policy changes might be needed, including easing the
government's iron grip on spending.
    Economists said the government could meet its 1990 target
and also increase spending by using money it got from the sale
of Nippon Telegraph and Telephone Corp shares and by taking
advantage of lower than expected interest rates on its debt.
Officially, the Finance Ministry is adhering to its tight
stance but some signs of change have appeared.
    "We do not have any intention of abandoning our objective to
restore fiscal balance," a Finance Ministry spokesman said.
    He said so far the ministry had tried to achieve two goals
simultaneously. These were reforming the government's fiscal
position and stimulating domestic demand.
    But the Finance Ministry spokesman added, "In looking at the
current situation of the economy and the relationship between
Japan and the United States, we feel we have to place more
emphasis on stimulating demand."
    Economists predict battles within the government over the
coming months as the Finance Ministry fights to ensure the
cracks in its policy do not lead to a complete breakdown of
fiscal discipline.
    "The Ministry is afraid that once there is a small hole in
the dike, it will lead to a flood," Industrial Bank's Taketomi
said.
    But Taketomi said the ministry, provided it has a device in
place to check excess spending for political reasons, is likely
to give the go-ahead to a shift in policy.
    "This seems to mark the first step toward a more active
fiscal policy in response to requests from the international
community," he said.
    Sumitomo's Koido said if the government quickly implements
the LDP's 5,000 billion yen package, economic growth in the
1987/88 year ending next March 31 could be around three pct,
His current forecast of 2.2 pct growth assumes a supplementary
budget of around 1,000 billion yen.
 REUTER
