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Japan Government Announces $60 Billion Stimulus Package

By Paul Blustein
The Washington Post


Battling a stubborn recession, Japan unveiled yet another package intended to boost the economy Thursday -- and once again, its critics, including U.S. officials, complained that Tokyo is doing too little.

Prime Minister Morihiro Hosokawa's government proposed an "emergency economic package" of public works, housing loans and other measures that it valued at about $60 billion, plus steps to ease government regulation in 94 areas.

Japan's economic health is of considerable interest to Washington, which has been pressing Tokyo to adopt growth-oriented policies so that Japan will absorb more imports, giving a lift to the economies of the United States and other nations.

In Washington, Clinton administration officials said the package was not enough.

White House press secretary Dee Dee Myers called the package "a good first step... We hope to see more."

Analysts here in Tokyo questioned whether this package would do much more good than the previous ones, noting that the likely stimulative effect is considerably less than the $60 billion figure would suggest.

"It's support for the economy, but not stimulus," said Robert Feldman, chief economist in Salomon Brothers Inc.'s Tokyo office.

The announcement comes at a time when Japan's economy is showing fresh signs of weakness. Gross national product, the total value of the nation's output of goods and services, shrank at a 2 percent annual rate in the three months from April to June.

Japanese officials contended that the package announced Thursday differs in an important respect from the previous ones, because it includes not only the deregulation measures but also steps aimed at passing on the benefits of the strong yen to Japanese consumers.

Those items reflect the priorities of Hosokawa, the first prime minister from outside the Liberal Democratic Party in nearly four decades, who has sought to portray himself as the champion of the ordinary Japanese against the interests of industry and the bureaucracy.

Manae Kubota, chief of the government's Economic Planning Agency, said Thursday's package would boost economic growth by at least 1.3 percentage points.

But many Japanese business executives and private forecasters expressed disappointment with the package, saying it would likely increase growth by less than a half percentage point.

That is because the package, like previous ones, includes billions of dollars in items such as government land purchases and loans that generate little additional economic activity.