Staff writer

Amid rising domestic and international pressure to boost expenditures and revive stagnant consumption, time is running short for the government to announce a much-awaited pump-priming package.

Even as the fiscal 1998 state budget bills neared passage by the Lower House, Prime Minister Ryutaro Hashimoto, who has refused to announce a departure from his fiscal austerity policy, remained quiet about a widely expected extra budget, which would include new expenditures to boost the economy.

He appears intent to keep that posture at least until the bill is enacted.

Time is limited because large-scale economic stimuli should be made public to sustain stock prices before March 31, when a majority of Japanese firms close their books. In addition, analysts have said that Hashimoto will not be allowed to be empty-handed when he visits London early next month to attend the Asia-Europe Meeting summit.

Under the circumstances, the Hashimoto administration and his Liberal Democratic Party are likely to continue playing different roles for the time being: The government will maintain the appearance that Hashimoto has never abandoned his original policy of fiscal austerity, while the LDP will draft a new economic package that goes against the austerity principles.

For the past month, circumstances surrounding the nation's troubled financial sector seem to have improved to some extent, largely due to improved confidence in Japan's financial system after a 30 trillion yen scheme was formulated to help the banking system, observers said.

Under the scheme, public money is available to strengthen the financial bases of the nation's commercial banks. The Cabinet has approved roughly 1.8 trillion yen to shore up the capital of the nation's major 21 banks.

Lenders to Japanese commercial banks abroad reportedly reduced the extra interest rates they impose on these banks. The additional interests, often referred to as the "Japan premium," dropped recently to below 0.2 percentage point from 1 percentage point on three-month loans.

However, it is believed that last week's Economic Planning Agency prediction that fiscal 1997 will see the first negative economic growth in 23 years has brought about more calls for fiscal boosters.

The U.S. has stepped up its demands, saying Japan should play a role as a leader in Asia and buy more imports from Asian nations to help ease economic crises in the region.

As things stand, the task to draft an extra budget for 1998 has fallen on LDP policy chief Taku Yamasaki, who said earlier this month that the ruling party will prepare for economic incentives to the tune of 10 trillion yen or more.

Yamasaki has said that the 10 trillion yen package will include public works projects and programs to improve the nation's information and communications networks, to further promote science and technology and to strengthen environmental protection, more measures in the field in education and social welfare as well as carrying out tax incentives for corporate capital investment.

Yamasaki is expected to announce the framework of the supplementary budget next week after obtaining approval from party executives March 23, enabling Hashimoto to bring with him, when he attends the ASEM meeting, stimulus measures to improve international confidence in Japan's commitment to domestic demand-led economic recovery.

Another set of pump-priming measures consisting of nonfiscal measures that was originally scheduled to be announced March 20 is expected to be made public next week along with the framework of the extra budget. The planned steps include measures to spur land transactions and to revalue firms' landholdings at market prices to give firms a larger capital base.

The extra budget is expected to be finalized by the government before Hashimoto visits Birmingham, England, on May 15 to attend the three-day summit meeting of the Group of Seven nations and Russia.

LDP Secretary General Koichi Kato has indicated that the extra budget will be partly funded by issuing construction bonds.

Kato's suggestion is intended to avoid contradicting the fiscal reform law, which restricts the issuance of deficit-covering bonds. LDP officials have tried to avoid revising the austerity law, despite mounting calls from the opposition camp and the U.S. to amend the law to enable the government to take more effective budgetary steps including a large-scale tax cut.