Koichi Kato, secretary general of the ruling Liberal Democratic Party, Tuesday said that the target year for fiscal reform can be moved back by two years from the original goal year -- a step that would provide flexibility in working out economic stimulus measures.

While the Fiscal Structural Reform Law says that the issuance of deficit-covering bonds must be terminated by the end of fiscal 2003, Kato said that date can be extended to 2005, opening the way for more pump-priming measures such as the implementation of large-scale tax cuts.

"Although I believe various measures can be taken within the limit of the fiscal reform law, the target year can be extended if it is necessary," Kato told reporters. "Permanent income tax cuts, for instance, cannot be implemented under the current framework of the law."

Because the target year in the original bill was 2005, there should be no complaints if it is now extended to that year, Kato added.

The target year had been moved forward to 2003 due to strong pressure from influential lawmakers. Kato said many people believe the fiscal austerity law prevents the government from implementing vigorous economic measures and that moving the target date back to 2005 would make people more optimistic, Kato said.

Kato initially expressed his plan for increased flexibility during the LDP's executive council meeting. He was responding to criticism from some lawmakers over the party's decision to carry out economic stimulus measures within the limits of the fiscal reform law.

In the meeting, former Deputy Prime Minister and Foreign Minister Yohei Kono expressed dissatisfaction with the party's decision not to carry out a large-scale income tax cut for the time being and to implement economic stimulus measures within the constraints of the fiscal austerity law.

Later in the day, one of the two non-Cabinet allies of the LDP suggested that the fiscal austerity law be partly revised so that planned economic-stimulus measures can be drafted in a flexible manner.

During a meeting of the secretaries general and policy chiefs of the LDP, the Social Democratic Party and New Party Sakigake, Sakigake Secretary General Hiroyuki Sonoda said necessary revisions should be made to the Fiscal Structural Reform Law while maintaining the basic principle that the nation should cut spending in general to reduce mounting debts.

The six top officials of the three parties met to start discussing a planned package of economic-stimulus measures.

During a meeting of the LDP's panel on economic measures earlier in the day, policy chief Taku Yamasaki said the party hopes to announce the framework of the economic package on Thursday.

During the talks between the three parties, the LDP presented a draft plan of the party's economic measures, which includes the frontloading of public works projects planned in the fiscal 1998 general account budget and expanding investment in fields considered to be promising for the future.

These include housing, research and development, medical care and social welfare, the environment, information and communications, education, and improvements in distribution and infrastructure in the central part of cities, according to the LDP.