Finance Minister Kiichi Miyazawa said Wednesday that the 500 billion yen reserve budget should be used to shore up the economy soon after the June 25 general election, bolstering the ruling coalition’s joint campaign pledge.
Miyazawa said during a news conference that the reserve budget would be allocated separately to the possible September decision to prepare a supplementary budget.
The ministry’s budget bureau has recently begun studying ways to use the reserve fund for public works projects, he said.
Miyazawa said the spending is necessary because the economy has not recovered sufficiently, despite 2.4 percent growth in the January-March quarter.
But he reiterated that a decision on whether a supplementary budget is necessary must wait until April-June data are released in September.
Miyazawa indicated he would support a move by the Bank of Japan to tighten the 15-month-long zero-interest rate policy as doing so would coincide with the government’s possible supplementary budget, which is a form of expansionary policy.
“(BOJ Gov.) Hayami apparently believes the current zero-interest rate policy is not helping economic recovery,” Miyazawa said.
Insurance change eyed
An advisory panel to the finance minister said Wednesday that insurance firms should not necessarily be required to value bonds, stocks and other financial products at market value, as they are required to do when closing books beginning fiscal 2000, which ends March 2001.
The Financial System Council stated its position taking into account the fact that insurers hold more long-term bonds than other firms, in an effort to ensure stable insurance payments over the long term, officials said.
Given the council’s proposal, financial authorities plan to work out details on new accounting rules, the officials said.
New accounting rules in Japan, effective from fiscal 2000, will require corporate balance sheets to reflect the market value of a company’s real estate and their holdings of financial products.
At present, insurance companies can choose between a method of valuing bonds and other asset-holdings at purchase prices when closing books, or a way of renewing book values of asset-holdings when the market prices of the assets fall below book value.
The panel concluded that if insurers are obliged to value securities at market prices, the fall in bond prices would cause them to incur a capital deficit, forcing them to go insolvent even without management problems, the officials said.
The panel made three proposals:
* insurers should introduce the market price valuation method on the condition that the characteristic of insurers’ financial structures is made known;
* the introduction of the accounting method should be postponed until proposals on valuing liabilities at market prices are agreed to by the parties concerned;
* and the accounting method should be applied only to some of the bonds that insurers hold.
Ideas on applying ways of valuing assets at market prices on insurance companies have not been standardized internationally.
In Japan, the introduction of the new accounting method for insurance companies is unlikely to be realized when the companies close their books for fiscal 2000, industry sources said.