The government will consider lowering donation taxes to help boost domestic demand, Prime Minister Yoshiro Mori indicated Monday.

“Leaving (one’s assets) unused and lying dormant does not generate new wealth. It is important to think about a new money flow and how it will change (the situation),” the prime minister told the Lower House Budget Committee.

He made the remarks in reference to the possibility of expanding the basic 600,000 yen tax-deductible ceiling recipients of monetary gifts face.

Finance Minister Kiichi Miyazawa expressed his consent, saying, “There is room to review whether the current 600,000 yen ceiling is appropriate. We will fully study the situation.”

Concerning the issue, Shizuka Kamei, policy affairs chief of the Liberal Democratic Party, has called for raising the ceiling to some 10 million yen.

Speaking during a TV program Sunday, he said that such a move would encourage affluent elderly people to pass on their unused money to their children and grandchildren, thus boosting domestic demand.

During Monday’s Diet session, Mori reiterated that he will put ensuring economic recovery ahead of launching fiscal reconstruction. As secretary general of the LDP, “I supported policies of former Prime Minister Keizo Obuchi in pursuing economic recovery . . . and I intend to further promote those ideas.”

Meanwhile, Miyazawa expressed his intention to consider bringing forward the schedule for implementing the fiscal 2000 budget and using the 500 billion yen reserve fund for public projects.

Concerning the prospects for the fiscal 2001 budget, he said, “If the ongoing economic recovery goes well and leads to an improvement in the job and salary situations, we can probably reduce the issuance of deficit-covering bonds.”

Policy tied to spending

The Bank of Japan will closely watch whether a nascent economic recovery in the corporate sector is pushing up household spending before deciding whether to terminate the zero-interest-rate policy, BOJ Gov. Masaru Hayami said Monday.

Hayami made the comment at the start of a quarterly meeting Monday attended by managers of the central bank’s 33 branches in Japan as well as officials from its offices in London, New York and Hong Kong.

“The improvement in Japan’s economy is becoming distinct,” Hayami said, reiterating the BOJ’s economic assessment released earlier this month.

“Recovery has started in some areas of private demand, as seen in a gradual upturn in business fixed investments,” he said.

Concerning the nation’s financial system, Hayami said that it is regaining confidence. To promote its further stabilization, financial institutions must make sure the effects of the recently announced realignment moves are felt as soon as possible, he said, adding that they must complete their bad loan writeoffs.

The BOJ chief said deflationary pressure on prices, despite having become weaker, warrants further attention.

Meanwhile, Minoru Masubuchi, manager of the BOJ’s Osaka branch, told a news conference on the same day that, in his jurisdiction of Osaka, Nara and Wakayama prefectures, more firms are moving to increase their capital spending.

Of the firms surveyed by the branch, 30 percent have said they plan to increase their investment in plants and equipment in the current fiscal year, Masubuchi said.

The ratio of such firms goes up to 40 percent among manufacturers, he added.

In another positive sign, exports have been going up, especially to the U.S. and the other parts of Asia, he said.

As a result, many firms, both in the manufacturing and nonmanufacturing sectors, are expecting pretax profits to increase in fiscal 2000, which ends March 31.

Osaka is home to many export-oriented manufacturers, such as Matsushita Electric Industrial Co.

On a recent dive in U.S. stock markets, exporters in the area are increasingly becoming cautious on their assessment of the U.S. economy, Masubuchi said, adding, however, that many support the scenario that the economy will avoid a hard landing.

Managers are upbeat

A March government survey on business sentiment released Monday showed that more and more corporate managers are upbeat about the economy.

The seasonally adjusted sentiment index for the April-June period came to 12, the first double-digit figure since the October-December period of 1996, the Economic Planning Agency said.

The index is calculated by subtracting the percentage of companies anticipating a downturn in the domestic economy from the percentage expecting an upturn.

On the outlook for the July-September period, the index, covering firms with capital of at least 100 million yen in all industries, rose to 29.

“Corporate business sentiment is clearly improving,” an agency official said.

For the January-March period, the index stood at 4, down from 6 in the October-December 1999 period. The January-March period, however, marked the third straight quarter in which the index was in positive territory.

On corporate capital investment, the key driving force of the economy, responses from companies indicated that capital investment fell a seasonally adjusted 3 percent in the January-March period compared with the previous three months, showing a contraction after the October-December period’s 5.7 percent rise.

But the agency said there is a strong possibility of an upward revision, particularly in the nonmanufacturing sector, as many firms did not provide their estimates in the last survey.

For fiscal 2000, which began April 1, capital spending for all industries is projected to decline 4.7 percent. If so, it would be the third straight year in which spending plans contracted.

Manufacturers are projecting a 2.6 percent increase for the first rise in three years, but nonmanufacturers are anticipating an 8.3 percent drop.

The quarterly survey was conducted March 10, targeting 4,528 of the around 34,100 firms with capital of 100 million yen or more. The results are based on replies from 4,160 firms.