Prime Minister Junichiro Koizumi promised Friday to take “bold and flexible measures” to tackle the nation’s economic problems over the next six months but offered few specific measures.
In a policy speech before the extraordinary Diet session, Koizumi also emphasized his determination to seek a comprehensive solution to North Korea’s abduction of Japanese nationals, as well as Pyongyang’s nuclear weapons program, during upcoming normalization talks.
With these policy tasks looming large, the Diet session, which runs through Dec. 13, is an important testing ground for the Cabinet that Koizumi named on Sept. 30.
“The most important issue we currently face is the rebirth of the Japanese economy in an increasingly severe environment,” Koizumi said. “I intend to compile comprehensive response measures immediately, with a view to accelerating reforms in the coming six months.”
Two key government economic panels are currently debating steps the government should take in a comprehensive economic package to be released at the end of this month.
One is a task force on financial reform led by Heizo Takenaka, who replaced former Financial Services Minister Hakuo Yanagisawa in the latest Cabinet reshuffle. The other is the Council on Economic and Fiscal Policy, an economic policy-setting panel headed by Koizumi.
The focal point of discussion is whether the government will inject fresh public funds into banks to bolster their capital bases, which would probably be significantly depleted as a result of active disposals of their bad assets.
Commenting on the battle against deflation, Koizumi said, “The government and the Bank of Japan will unite” to tackle the issue, while “paying careful attention to the effect on employment and the operations of small and medium enterprises.”
Koizumi’s stated readiness to take “bold and flexible measures” to deal with anticipated economic turbulence is taken as an indication that the government may consider injecting public funds into banks and approving additional fiscal spending to create safety nets to deal with the anticipated rise in corporate bankruptcies and unemployment.
Koizumi, however, did not mention whether he will break his pledge to limit the issuance of government bonds to 30 trillion yen in fiscal 2002 to fund additional spending. Heavyweights in the ruling bloc, led by the Liberal Democratic Party, have been calling for a supplementary budget for the current fiscal year to help boost the economy.
With respect to tax reform, Koizumi said the government will quickly implement the “deepest tax cuts possible, in excess of 1 trillion yen” in light of the current dismal economic situation.
So far, the panel discussing the government’s tax reform proposals have reached a basic agreement to submit a tax revision bill to the ordinary Diet session that is to convene early next year and make those tax cuts retroactive to January after the bill is passed. The size of the tax breaks has yet to be finalized, however.
Koizumi also promised that the government will uncover the truth behind a series of kidnappings of Japanese nationals by North Korean agents in the late 1970s and 1980s when representatives of the two nations meet for normalization talks, as well as help the victims and their relatives.
“Such cases must never again be allowed to happen,” Koizumi said, adding that the abductees return is “merely the first step toward solving the (abduction) issue.”
On Japan’s normalization talks with North Korea, set to resume Oct. 29 in Kuala Lumpur after a two-year hiatus, Koizumi reiterated his resolve to comprehensively tackle Japan’s remaining concerns over the reclusive state.
“On Sept. 17, I became the first Japanese prime minister ever to visit North Korea,” Koizumi said, adding that in his talks with Kim Jong Il he sensed a desire to “seek comprehensive progress on the various other issues that remain, beginning with security and including the operations of spy vessels, missiles and the problem of the development of nuclear weapons.”