Finance Minister Hikaru Matsunaga departs today for Washington where he will attend a series of financial meetings, including a gathering of the Group of Seven finance ministers and central bankers.
That meeting is expected to focus on the Japanese economy and the Asian financial crisis. Government officials maintain that Prime Minister Ryutaro Hashimoto’s pledge last week to take more flexible steps such as additional income tax cuts to boost domestic demand will help reduce criticism from other G-7 partners of Japan’s economic management.
There were rumors that Matsunaga would not attend the G-7 meeting in order to attend an Upper House Budget Committee debate over Hashimoto’s plan to revise the fiscal austerity law, but by 11:00 p.m. it was clear that such action would create even more turmoil, and he was told to get on the plane.
Hashimoto said that fiscal consolidation policies would be eased and a pump-priming program worth at least 16 trillion yen, including 10 trillion yen in “real water” measures would be drawn up later in the month. “There was (international) pressure to do something about our economy, and that is what the prime minister has done,” said a senior Finance Ministry official, adding, “I think this reduces the extent to which the Japanese economy will become a focus of the discussions.”
However, while parties such as the United States have welcomed Hashimoto’s comments regarding the scale of the measures to be implemented, many, both at home and abroad, are still waiting for details before they embrace the upcoming package as one that will effectively nurse the economy back to life. “Nothing I’ve seen so far provides useful information on the magnitude of (the package’s) economic effects, and (when it comes to fiscal policy,) the devil is in the details,” William Niskanen, chairman of the Cato Institute, a Washington-based think tank, said in Tokyo last week.
Details of the package will be formulated in upcoming weeks, and a supplementary budget for the current fiscal year could be compiled by the time of the G-7 summit meeting in Birmingham, England in mid-May, according to Finance Ministry officials.
Another focus of the Washington talks is the debate surrounding the currency and financial crisis which has gripped many Asian nations over the past months. With the deal reached last week between the International Monetary Fund and Indonesia to pave the way for dispersal of additional assistance to the troubled nation, many financial officials said calm has at least temporarily been restored to the region’s markets.
“The debate now moves to evaluating what we’ve learned from the crisis, and what steps should be taken to galvanize the functions of international financial institutions such as the IMF,” said a high-ranking official at the Finance Ministry’s International Finance Bureau.
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