The 77.67 trillion yen fiscal 1998 national budget was passed by the Diet late April 8 in a House of Councilors plenary session vote.

The vote was carried through the chamber's Budget Committee with majority support of the ruling Liberal Democratic Party and the Social Democratic Party earlier in the day.

A proposed chamber resolution that would have called on the state to take proper pump-priming steps did not materialize due to the opposition's demands that the government's responsibility for the lackluster economy be clearly stated in the document.

The passage of the budget -- eight days after the fiscal year began on April 1 -- will in effect enable the government to lift its gag order on discussing compilation of a pump-priming supplementary budget that might include tax cuts.

For weeks, Prime Minister Ryutaro Hashimoto had been forced to stick to the budget his Cabinet approved late last year "as the best one," even though almost every economic index seemed to indicate the nation was on the brink of -- if not already in -- a recession.

Thus unfettered, Hashimoto and the LDP, which he heads, are expected to veer toward putting fiscal reconsolidation on hold to take stimulus steps in line with the 16 trillion yen pump-priming package the party drew up last month.

Hashimoto was expected to hold a news conference today to outline the steps he intends to take to revive the economy. The government and the parties supporting Hashimoto are expected to draw up details of a stimulus package later in the month, and senior LDP officials, including Secretary General Koichi Kato and policy affairs research council chief Taku Yamasaki, have said they hope to see the "real water" portion of the plan total around 8 trillion yen, the largest ever.

With the budget safely enacted, Hashimoto was to call together his Conference on Fiscal Structural Reform before the end of the week to discuss revising the Fiscal Structural Reform Law, which curbs the issuance of deficit-covering government bonds and in effect limits room for pump-priming.

Some LDP leaders argue, however, that there is not enough time remaining in the current Diet session, which ends in mid-June, to enact any revisions to the law, and that the issue should be separated from the upcoming stimulus package.

The law stipulates that new issuances of deficit-covering bonds must be reduced every fiscal year until they reach zero in fiscal 2003.

The government can stay within the bounds of the law even by issuing roughly 1.4 trillion yen worth of deficit-covering bonds in fiscal 1998. This would, in theory, restore for 1999 the 2 trillion yen in income and resident tax cuts that were carried out this year.

There is also the option of revising the austerity law to push back its target year to fiscal 2005, which was how a rough draft of the law stood before senior lawmakers suggested the date be moved up.