Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, February 10, 1994 TAG: 9402100045
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: Associated Press
DATELINE: TOKYO LENGTH: Medium
The long-awaited $140 billion economic stimulus package includes $54 billion in tax cuts, plus major public-works spending and measures to promote investment.
"At a time when our economy is struggling, it will help the recovery blossom," Prime Minister Morihiro Hosokawa said of the plan's centerpiece, the tax cut.
The nation's chief economic planner, Manae Kubota, told reporters the package was expected to lead to economic growth of at least 2 percent in the coming fiscal year, beginning April 1.
Japan's financial world has sought government steps to spur the economy for months, and word that the package was imminent boosted stock prices before the market closed Tuesday.
But prices fell in early trading Wednesday, indicating investors thought the package would not do enough to help the economy.
Some economists also expressed reservations.
"It is possible that the measure will end up being only a temporary stimulus," said Junichi Miyake of Japan Research Institute in Japan's leading economic newspaper, the Nihon Keizai.
The plan, announced three days before Hosokawa is to meet President Clinton in Washington, also met a lukewarm reception from U.S. Treasury Secretary Lloyd Bentsen in Washington.
The Clinton administration wants Japan to get its ailing economy back on track in order to boost demand for American imports and bring down Japan's huge trade surplus.
Bentsen characterized the package "a modest step" toward solving the perennial problem of Japan's trade surplus.
Speaking before the House Budget Committee, Bentsen said it remains to be seen if the package will be sufficient to narrow the U.S.-Japan trade deficit, though he added, "Every little bit helps."
Tensions are high between Washington and Tokyo as the two countries struggle with a trade dispute that threatens to boil over on the summit's eve.
The two sides were holding final talks in Washington in an attempt to reach an accord before Friday's Hosokawa-Clinton talks. A Clinton administration official, speaking on condition of anonymity, said the United States was poised to walk out of the talks unless prospects for a deal improved in a hurry.
Japan is refusing to relent on a key point of dispute: the U.S. push to set numerical targets - allocating a market share to U.S. products - to measure the effectiveness of market-opening measures. The Tokyo government says that would violate the principle of free trade.
The unveiling of the economic package was delayed by several days of infighting over tax provisions that graphically illustrated the shakiness of the governing coalition.
Hosokawa had wanted to cut income taxes and pay for that by nearly doubling the sales tax three years from now. But the Socialists, the biggest party in his alliance, balked, threatening to split the coalition and possibly bring down the government.
by CNB