Staff writer

The deliberations of the 18-day extraordinary Diet session were essentially completed Friday by the approval of the fiscal year’s third supplementary budget that will finance the government’s 24 trillion yen stimulus package.

The session will officially close Monday, after which the political focus will shift to preparing the fiscal 1999 budget and attempts by the ruling Liberal Democratic Party and the Liberal Party to form a coalition before the ordinary Diet session begins Jan. 19.

Following intraparty turmoil and hesitation, Obuchi is expected to reshuffle his Cabinet in accordance with a coalition agreement he signed with Liberal Party President Ichiro Ozawa last month. Expectations are high that some Liberal Party members will be in ministerial posts when the Cabinet forms.

Although the policy hurdles presented to the LDP as preconditions for the alliance at first seemed high, both sides have been gradually compromising. Political observers anticipate even more concessions as the process unfolds.

The 5.6 trillion yen extra budget approved by the House of Councilors on Friday will enable the Obuchi administration to implement its pump-priming package and promote government efforts to secure positive growth in fiscal 1999, as the prime minister pledged in his policy speech to kick off the extraordinary session.

The budget features an outlay of 2.14 trillion yen for a set of measures to fix the credit crunch, 3.96 trillion yen for measures to develop social and economic infrastructure, and a 769.8 billion yen allocation for distributing controversial shopping coupons, mainly to the elderly and families with children under 16.

To rev up the ailing economy, the Diet also approved a bill to freeze the belt-tightening Fiscal Structural Reform Law, enacted in November last year to reduce the nation’s huge fiscal deficit.

In an effort to address the country’s ailing banking sector, the Diet also approved members of the Financial Revitalization Commission, a new independent five-member body that will be responsible for reorganizing Japan’s troubled financial institutions.

It also endorsed the new Japan-South Korea Fisheries Pact to replace a 1965 bilateral fishing pact scheduled to expire on Jan. 23.

“It was like heaven compared with the last Diet session,” a senior LDP lawmaker said with a sigh, stressing the importance of having the Liberal Party as its sidekick. “All Diet deliberations were conducted without delay this time.”

During the previous extraordinary Diet session, which ended Oct. 16, the LDP had a hard time securing Diet approval of key bills to resuscitate the nation’s financial sector, due to its lack of a majority in the Upper House.

With the approval of key bills during this Diet session, the LDP now moves on to its annual work of putting together the budget for the next fiscal year. This time, the Liberal Party will join in the drafting.

Putting other issues on the back burner, the two parties have so far been trying to hammer out common economic policies first, such as tax reforms, to include them in the Finance Ministry’s budget draft to be released Dec. 21.

By participating in the budget compiling process, which has long been controlled by the ruling LDP, the Liberal Party is likely to gain more influence over the nation’s politics, government ministries and various industries.

In a move to demonstrate the LDP’s willingness to form a firm bond with the Liberal Party, Obuchi has already given the green light to some of Ozawa’s proposals.

The government and the LDP have already decided to submit a bill to the next ordinary Diet session that would introduce a deputy minister system proposed by the Liberal Party to increase politicians’ presence at ministries and agencies.

Even some contentious issues, such as the Liberal Party’s proposals regarding the consumption tax, are soon likely to be settled by compromise.

The Liberal Party initially proposed that the 5 percent spending tax be abolished for a year to stimulate the economy. After a year, the tax rate would be increased annually, with revenue used solely for welfare purposes.

But a senior Liberal Party legislator indicated Friday that so long as the LDP agrees to make drastic tax reforms its medium- to long-term policy goals, his party will not press for changes to the consumption tax.

Though Obuchi has not clarified his stance on the issue or indicated the timing of the Cabinet reshuffle, it is expected to come either later this month or in early January.

Meanwhile, opposition leaders are cudgeling their brains to counter the LDP-Liberal Party alliance because their parties failed to form a united front against the ruling camp during the current extraordinary Diet session.

Naoto Kan, chairman of the largest opposition party, the Democratic Party of Japan, said that during the current extraordinary session the LDP succeeded in enticing the Liberal Party and New Komeito, another opposition group, by promoting the LDP-Liberal Party alliance talks and by including the coupon scheme, initially proposed by New Komeito, in the extra budget.

“But New Komeito has clearly said it will not join the LDP-Liberal Party alliance,” he said. “In the next ordinary Diet session, we would like to negotiate with other opposition parties, including the Social Democratic Party, to unite opposition forces.”

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