The ruling Liberal Democratic Party announced a set of measures Oct. 21 that it hopes will revive the flagging economy mainly through deregulation.Bound by a pledge to curtail government spending, the LDP's package relies less on traditional fiscal stimulus such as public works spending and personal income tax cuts. In the package it presented to the government later in the day, the LDP said it will "make efforts to greatly reduce the corporate income tax rate to international levels" so as to create an environment that would lead to new businesses.The ruling party also sought to abolish or at least suspend collection of the 0.15 percent landholding tax and introduce measures to reduce the tax burden on certain land transactions for individuals and companies.Additional suggestions submitted with the measures include the introduction of U.S.-style three-day holidays to boost private consumption. Daylight-saving time was not an option mentioned.Taku Yamasaki, head of the LDP's Policy Affairs Research Council, said the party decided to draw up the package because it felt that the economy is actually worse than the government is officially inclined to acknowledge. But many of the measures, especially those on taxation, are vague -- such as on the extent of possible reductions in the corporate tax rate -- as they need to be further debated both within the LDP and among its allies, the Social Democratic Party and New Party Sakigake.Detailed tax revisions will not be outlined until later in the year -- but hopefully earlier than the usual mid-December timing for the culmination of debate on annual tax reforms, according to Yamasaki. The LDP council chief said he has urged party tax officials to at least let the revisions take effect Jan. 1 even if they are enacted later.The plan includes four main pillars -- deregulation, promotion of land transactions and housing, assistance for small and medium-size businesses and various revisions to the tax system.Prime Minister Ryutaro Hashimoto's commitment to fiscal reconsolidation, coupled with a lack of sufficient debate between the LDP and government officials, kept the LDP from compiling a more attractive package, observers said. Hashimoto's reform plan demands that the government reduce its fiscal deficit to 3 percent or less of gross domestic product and stop issuing deficit-covering bonds by fiscal 2003.Nevertheless, Yamasaki stressed that "past pump-priming packages did not necessarily lead to really solid economic recovery," and that "deregulation in the longer term would be more effective in boosting the economy."He also said, "Calculations by the Economic Planning Agency say that deregulation would have the effect of boosting economic growth by an average 0.9 percent annually over the next six years." The LDP's package aims to carry out measures that would partially reverse the government's position over the past few years to enact steps that would lower land prices, which soared during the bubble economy of the late 1980s.In an effort to spur land and real estate liquidity and encourage housing purchases, the LDP called for a review of existing taxes on land ownership and transfers. It also said it would work to revise the current system so that prior notification would not be required for transactions affected by the National Land Use Planning Act and to review current building-to-land ratio restrictions in some areas to spur better land use.
