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The government should take the initiative to quickly inject tens of trillions of yen in public money into the nation’s major banks to boost their capital bases and ease the credit crunch, a special advisory panel to Prime Minister Keizo Obuchi proposed Wednesday.The Strategic Economic Council, headed by Hirotaro Higuchi, chairman of Asahi Breweries Ltd., also called for an additional stimulus package worth more than 10 trillion yen to shore up the sagging economy.Alarmed by the nation’s faltering financial sector, the council compiled an emergency short-term policy package and submitted it to the prime minister after the council’s sixth meeting Wednesday morning. “I will order Cabinet ministers to discuss ways to realize the proposals and do my best to implement effective policies appropriately and expeditiously to resuscitate the economy,” Obuchi said after receiving the proposals.The council hopes carrying out the proposed measures will pull Japan out of its current negative growth phase within a few years. “If we leave current conditions as they are, Japan’s economy next year may also suffer negative growth,” Iwao Nakatani, a council member and professor at Hitotsubashi University, said at a news conference.The government forecasts the nation’s gross domestic product to shrink 1.8 percent for the current fiscal year through next March, following minus 0.7 percent growth for fiscal 1997.The council proposed that the government take “strong initiative” and inject public funds into the nation’s major banks with weak capital bases.Recipient banks should be selected after being inspected by the Financial Supervisory Agency, and those banks must restore their financial health within three years, the council said. If the recipient banks fail to restore their health, the responsibility of their executives should be made clear, it said.Banks recently have been slashing loans and calling in old loans from corporate borrowers out of worries that their falling capital-adequacy ratios will prompt investors to dump their shares and cause interbank market creditors to squeeze call loans to the banks. There are strong opinions within the government and the Liberal Democratic Party that large sums of taxpayer money should be injected into the nation’s major banks that have a capital-adequacy ratio of more than 8 percent to prevent the current credit crunch from worsening, even if the banks don’t solicit such funds.Although the bank recapitalization bill that Tuesday cleared the Lower House and is currently up for Upper House debate will allow such capital to be injected into healthier banks, many financial institutions are believed reluctant to apply for the funds out of fear of losing customers and the threat that their top executives will be held liable.Although the council did not go so far as to call for forced injection of money, its members hope the government will persuade the banks to accept public funds, according to Nakatani. “We cannot force them, but we can still persuade them (to accept the money),” he said.The advisory panel also called for economic stimulus measures that would result in more than 10 trillion yen in real fiscal spending, including individual and corporate income tax cuts of more than 6 trillion yen and freezing the planned hikes in welfare pension fees.Under the scheduled welfare system reform in Japan, welfare pension premiums are expected to rise from the current 17.3 percent of monthly income to 19.5 percent next October. Because such a hike will have a negative impact on the economy, the government should consider freezing it for a while, the panel said.The 10-member council, consisting of six business leaders and four scholars, was inaugurated in August and is tasked with giving the prime minister a solution for rejuvenating the economy.

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