11th in a series
Prime Minister Ryutaro Hashimoto must make the public feel more relaxed about spending, by explaining that Japan is still very strong but that the “Big Bang” reforms and other changes are needed, said Peter J. Woods, chairman of the Council of the European Business Community.
The ongoing campaign for the July 12 Upper House election is a great opportunity for him to do just that, Woods said. “The current government has been very brave in many ways … In 50 years, this particular Hashimoto government will be remembered as the one that actually made very significant changes for the long-term benefits of Japan,” he said.
However, the government made a “tragic mistake” in its timing for raising consumption tax from 3 percent to 5 percent in April 1997, he said. “Just when it looked as if the economy was going to grow a little bit, (Hashimoto) increased the consumption tax. The timing was a disaster and caused the recession,” he said.
But Woods said that this is by no means the end of the world for Japan, since the problems now are “merely” the bank debt and the need for more deregulation. He likened the nation’s economy to an ill human body, saying, “The body is still extremely strong. You just have to take something for your flu or cold or whatever else, and encourage people to recover and start spending again.”
To that end, he said, the government must send a very visible and obvious message by reducing or canceling the consumption tax and making personal income tax cuts permanent.
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