The government on Monday unveiled a 24 trillion yen economic stimulus package — its largest to date — aimed at posting a positive economic growth in fiscal 1999 and creating 1 million new jobs.
The package, the eighth since the burst of the economic bubble in 1991, amounts to 17 trillion yen excluding tax cuts, eclipsing the 16.65 trillion yen package adopted in April.
The fiscal austerity law, which binds government spending, will be frozen to implement the large-scale stimulus measures. A relevant bill will be submitted to an extraordinary Diet session later this month, but how long the law will be frozen is not certain, government officials said.
The Economic Planning Agency said the latest package should push up the real gross domestic product by at least 2.3 percent in the first year of implementation. Prime Minister Keizo Obuchi also sounded a hopeful note. “A clear indication of positive growth must appear in the next fiscal year,” which begins in April 1999, he said. “The package is the first step toward putting the Japanese economy back on a path of sustainable growth within two years.” Obuchi gave himself a two-year deadline in his first policy speech to the Diet.
The package includes 8.1 trillion yen for public projects, 5.9 trillion yen for measures to ease the credit crunch and more than 6 trillion yen for cuts in personal, residential and corporate taxes. However, Obuchi effectively quashed hopes for a reduction in the consumption tax, saying such a move would be “difficult to implement.”
“Not only the consumption tax, but it is true that all kinds of taxes should be lowered,” Obuchi said. “But considering the current fiscal conditions and the tax system, a (consumption) tax cut is difficult, and I’d like to ask the Japanese people to understand the situation.”
The Liberal Party, with which the ruling Liberal Democratic Party hopes to form an alliance, has been a strong advocate of a consumption tax reduction to stimulate spending. Ruling out such a cut, Obuchi stressed that the government must launch constructive discussions on a long-term tax strategy that would cover mounting expenditures for such items as pensions, medical treatment and nursing care.
Asked if the consumption tax should be transformed into a “welfare tax” that would direct all of its revenue to welfare programs, Obuchi said the issue must be dealt with cautiously to keep the plan’s various advantages from also creating disadvantages.
The package’s public works proposals include “future-oriented” projects related to information technology and telecommunications, such as a plan to construct computerized expressways. The package also includes 1 trillion yen to create job opportunities, especially for middle-aged people who are having difficulties finding work.
Of the 24 trillion yen total, actual fiscal spending by the central and local governments will reach 10.5 trillion yen. The central government will compile a supplementary budget for the current fiscal year to finance the package and submit it to the extraordinary Diet session tentatively slated to convene Nov. 27.
Government officials said the size of the extra budget would be around 8.1 trillion yen.
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