WASHINGTON -- The International Monetary Fund on Thursday presented a package of policy proposals to rejuvenate Japan's ailing economy, including a cut in the national consumption tax and a revamp of the postal savings system.
Like their counterparts in the United States and other countries, IMF officials have been concerned for some time about the feeble performance of Japan's economy. Gauging what the Japanese government has so far done to solve the contingency, IMF officials say in the report that "The overall response thus far has fallen short of the timely, comprehensive and forceful program that is required, given the seriousness of the present situation."
The annual economic performance assessment of member countries includes praise for steps Japan has already taken to solve its woes, but the international financial watchdog also underlined the urgency with which Japan must clear bad loans from its troubled banking sector. In addition, it revised its forecast for Japan's gross domestic product for this year from zero growth to negative 1.7 percent -- which would be the worst contraction in postwar Japanese history.
Echoing the concerns of the international financial community, the IMF cited "uncertainty regarding the extent of underlying balance sheet problems and the sufficiency of the authorities' strategy" for revamping Japan's banks.
More pressure to act is expected from Washington in September, when Prime Minister Keizo Obuchi is scheduled to meet U.S. President Bill Clinton.
Economic growth in 1999 will be low, and "downside risks are considerable," the IMF says. It has proposed the use of an earmarked 30 trillion yen to infuse capital into the 19 major, or "core," Japanese banks, plus other financially sound regional institutions.